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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 for leveraging its coal resources is likely to continue, with the fossil fuel linkage to thermal power projects likely to reach 1 billion tonne from the current level of around 550 million tonne.

This assumes significance given that India has the world’s fourth-largest coal reserves and the second-largest producer of the fuel. India’s coal production is expected to touch 1 billion tonne production this year.

“Currently, the coal supplied to power plants through linkages or long-term contracts stands at about 550 million and it is likely to surpass 1,000 million tonne by 2030 considering the current robust growth in power demand,” said a person in the know.

Coal linkages form a major part of the supplies to power plants. In the last financial year, the power sector was the largest consumer of domestic coal with 84% as total despatches to the sector was 737.9 million tonne during FY23, an increase of 9.1% over the previous year’s 676.3 million tonne.

The peak power demand is projected to reach 334.8 GW by 2030. The peak demand this year has touched 239.9 GW, way above the Central Electricity Authority’s (CEA) estimate of 230 GW.

This growth in linkages would come with the government looking at increasing the domestic production of coal to 1.5 billion tonne. Further, the coal ministry is also targetting to increase the peak rated capacity (PRC) of the coal mines to 2 billion tonne. PRC refers to the maximum quantum of coal that can be produced from the mines.

“There is an estimation that the country would require 1,500 million tonne of coal across sectors by 2030 and the production would be in line with the requirement. Further, the target is to achieve a peak rated capacity of 2,000 million tonne, so that in case of any excess requirement, we are able to produce up to 500 million tonne more in a year,” said another person.

Out of the PRC of 2 billion tonne, around 700 million tonne is expected to be contributed by the commercial and captive mines.

Satnam Singh, senior practice leader & director – consulting, CRISIL Market Intelligence and Analytics said: “We believe the coal demand from power plants including the captive ones by 2030 will be in the range of 950 million tonnes to 1 billion tonnes depending upon how much renewable energy capacities we are able to add and the scalability and cost competitiveness of battery energy storage solutions. The key point remains given the expected surge in power demand and given the size of the existing coal-based power plants capacity and the upcoming ones, the demand for coal by power sector will remain intact in this decade, and we may see a decline in absolute demand only in the later part of the next decade.”

The projection of nearly doubling the quantum supplied through long-term contracts comes at a time when the country is looking to meet the rising power demand and coal still continues to be the mainstay of India’s power sector. It contributes to around 75% of electricity generation in the country.

In FY22 and FY23, amid recovery power demand and non-commensurate supply of coal, the country witnessed a near-crisis situation. This year, both the power and coal ministries have taken proactive measures to avert any coal and power supply crunch.

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

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

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

The situation seems to have significantly eased from a supply gap of 2.25 lakh tonne on 1 October when the daily coal receipt was 19.38 lakh tonne, compared to the consumption of 21.63 lakh tonne.

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

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