Coal shortage: Will your electricity bill go up?


NEW DELHI: Can prices have risen to record levels globally, driven by shortages in Asia and Europe.
The global stock market has been nervous about concerns about rising energy costs, which will likely fuel inflation and slow economic recovery, especially in a country like India, where gasoline and diesel prices are already running high. at all-time highs.
The shortage of coal among thermal power plants across the country led to an increase in spot market prices in the energy exchange.
Spot prices have more than tripled in the past two weeks to Rs 16.5 per unit on Monday, from Rs 4.4 in September. Many generators and industrial users are forced to buy electricity at these high rates, as coal shortages have forced rotational power outages in several states.
In Andhra Pradesh, the prices of energy exchanges tripled to 15 rupees per unit of energy. In Punjab, the breakdown of state power Punjab State Power Corporation (PSPCL) was forced to buy around 1,500 MW of power for Rs 14.46 per unit on the power exchange on Monday, while a day earlier it bought 285 lakh units at an average price of Rs 11.6 per unit.
To cope with the electricity shortage, UP Power Corporation Limited is also purchasing additional power in an emergency. State-owned Gujarat Urja Vikas Nigam Ltd (GUVNL) is purchasing around 100 million units of power a day at a cost of Rs 150 crore to ensure there are no power outages.
The Center eventually stepped in and asked state-owned Coal India to increase supply, while the railways have been tasked with making rakes available to transport fuel to power plants.
the ministry of power it has also ordered power companies to increase supply to Delhi. Power producers have been asked to import up to 10% of their coal needs. The Ministry of Energy has managed two generators: NTPC and Damodar Valley Corp – to ensure that Delhi’s discoms get all the power they require.
However, NTPC stated that it has been making electricity available to the national capital, but distribution companies have been scheduling only 70% of the energy available to them, after which the government warned states that their supplies of Energy will be reduced if they are selling. electricity in energy exchanges to take advantage of rising prices.
How does this buying and selling of energy work?
Public companies mainly dominate the electricity sector, except in the generation and distribution sectors, where private actors participate.
Power Grid Corporation of India Limited (PGCIL) is the Central Transmission Utility (CTU), responsible for most of the interstate transmission projects.
Similarly, each state has a State Transmission Company (STU) along with private transmission companies that are responsible for establishing transmission projects within the state. In addition, there is a wholesale electricity market ecosystem between generators and large consumers at both the national and state levels.
Transmission service companies transport energy in bulk from generation plants to distribution substations through a network and at high voltages.
Distribution companies supply electricity from substations to individual consumers through a distribution network.
In cities like Delhi, Mumbai, Ahmedabad and Kolkata, private entities own the distribution business.
Nightclubs buy energy from generating companies through power purchase agreements (PPAs) and supply it to their consumers.
Therefore, for the end user to receive good quality electricity, it is important that the interruptions work well.
However, unrest across the country have faced high levels of losses and are struggling with debt, making it difficult for them to buy power and invest in the distribution network. This leads to a deficit in energy supply and poor distribution infrastructure. And this is where the electricity market comes into play.
Electricity in India is bought and sold on the energy market.
Energy transactions involve a buyer and a seller, which is a distribution company (DISCOM), a generation company (GENCO), an energy exchange, or a bulk consumer.
Now, urban energy consumption peaks at night due to a large number of users and also during peak summers and winters due to the use of heavy household appliances such as air conditioners, heaters, etc.
Rural consumption peaks early in the morning due to the use of water pumps for irrigation.
In peak demand scenarios, the contracted energy may become insufficient and more energy must be purchased through short-term trade. States with shortages have to buy electricity from the market at prohibitive costs, which is why inflation of energy prices has become the biggest risk for the recovery of growth in India.
In short, energy can be bought and sold on the short-term market on a “bilateral” basis or on energy exchanges such as IEX in a similar way to stocks that are bought and sold on stock exchanges. And, buying a certain amount of expensive power is almost unavoidable, since cheaper government stations cannot meet power requirements.
Ideally, most of a state’s power should come from cheaper long-term contracts. But state boards with liquidity problems often prefer to buy relatively high-cost power in short-term markets, often overnight, depending on their cash position.
Furthermore, short-term power does not require additional investment in transmission lines.
Outstanding dues from the Maharashtra state utility company to Coal India were Rs 3,176.1 million at the end of FY 21, while the Uttar Pradesh utility dues were Rs 2,743.1 million rupees. The fees of the Tamil Nadu State Utility Company were Rs 1,281.7 million, and those of the Rajasthan State Utility Company were Rs 774 million. Ironically, these four states have one of the highest thermal capacities, but with either zero days in stock or only one day in stock like October 10.
What does this higher spot price mean for the consumer?
Most states in India supply free or subsidized energy to certain categories of consumers, mainly domestic and agricultural users, through variable subsidies.
But subsidized power inflicts massive losses on power distribution companies (inconvenience) and affects their ability to pay power producers. Therefore, there is a possibility that electricity prices will increase due to higher priced coal having to be imported.
In a major policy shift, China has allowed its coal-fired power plants to charge its industrial and commercial customers market-driven prices.
In India this measure is also likely to occur, but it may not be possible to import coal at current high prices and on such short notice. Indonesian imported coal is currently at an all-time high of $ 160 per ton, from around $ 50 per ton in March, which is almost five times the price of domestic coal. The end consumer will soon have to pay a higher price for the expensive electricity purchased from power outages, which could translate into inflation across the economy.

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