Power plants’ fuel linkages to reach 1 billion tonne by 2030

New Delhi: Even as India undergoes a green energy transition, the country’s push to leverage its coal resources is likely to continue, with the fossil fuel linkage to thermal power projects likely to reach 1 billion tonnes from the current level of approx. for 550 million tons.

This is important because India has the fourth largest coal reserves in the world and the second largest producer of the fuel. India’s coal production is expected to touch 1 billion tonnes production this year.

“Currently, the coal supplied to power plants through long-term linkages or contracts stands at around 550 million and is likely to exceed 1,000 million tonnes by 2030 considering the current strong growth in power demand,” said a person on the information.

Coal connections form a large part of the supplies to power stations. In the last financial year, the power sector was the largest consumer of domestic coal with 84% as total shipments to the sector were 737.9 million tonnes during FY23, an increase of 9.1% over the previous year’s 676.3 million tonnes.

Peak power demand is expected to reach 334.8 GW by 2030. This year’s peak demand was 239.9 GW, much higher than the Central Electricity Authority’s (CEA) estimate of 230 GW.

This growth in ties would come as the government looks to increase domestic coal production to 1.5 billion tonnes. In addition, the coal ministry is also targeting to increase the peak capacity (PRC) of the coal mines to 2 billion tonnes. PRC refers to the maximum quota of coal that can be produced from the mines.

“There is an estimate that the country would need 1,500 million tonnes of coal across sectors by 2030 and that the production would match the requirement. In addition, the target is to reach a peak rated capacity of 2,000 million tonnes, so that possible in case of any surplus requirement, we are able to produce up to 500 million additional tonnes in a year,” said another.

Of the PRC of 2 billion tons, the commercial and captive mines are expected to contribute about 700 million tons.

Satnam Singh, senior practice leader & advisory director, CRISIL Market Intelligence and Analytics said: “We believe that coal demand from power plants including captive ones by 2030 will be between 950 million tonnes and 1 billion tonnes depending for how much. renewable energy capabilities we can add and the scalability and cost competitiveness of battery energy storage solutions. The key point remains given the expected rise in power demand and given the size of existing coal power plant capacity and those to come, will the demand for coal by power sector remain intact in this decade, and we may only see a decline in overall demand in the latter part of the next decade.”

The projection to almost double the amount supplied through long-term contracts comes at a time when the country is looking to meet rising power demand and coal remains the mainstay of India’s power sector. It contributes to approximately 75% of the country’s electricity generation.

In FY22 and FY23, amid recovering power demand and inconsistent supply of coal, the country witnessed an acute crisis. This year, the power and coal ministries have taken proactive measures to avoid any coal and power supply crisis.

On Thursday, state-run Coal India reported a 12% rise in its production so far in the current financial year (FY24) at 394 million tonnes (MT) and said an increase of 4.5% or 15 million tonnes on its supplies to the power sector. to 346 million tonnes during the April-October period.

While Coal India and the Coal Ministry reported an increase in coal production in October, the Union Power Ministry last week ordered the gencos to blend 6% of imported coal till March next year amid falling inventory thermal plants.

Data from the Central Electricity Authority showed that the gap between the daily consumption of coal by thermal plants and the daily supply of coal has narrowed over the past month. On November 2, the daily receipt of coal at thermal power stations stood at 23.10 lakh tonnes, while the consumption was 23.79 lakh tonnes.

The situation appears to have narrowed considerably from a supply gap of 2.25 lakh tonnes on October 1 when the daily receipt of coal stood at 19.38 lakh tonnes, against consumption of 21.63 lakh tonnes.

The plans to increase coal production and supplies coincide with the government’s plans to increase the country’s renewable energy capacity. India has set a target of achieving 500 GW of non-fossil fuel capacity, including renewable energy by 2030 from the current 179.32 GW.

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