A 115-Degree Heat Wave Is Making India’s Power Crisis Worse

(Bloomberg) -- A power crisis in India that's delivering hours-long blackouts, halting manufacturing lines and triggering street protests is forecast to continue for months, adding pressure on the nation's economic rebound.

Electricity outages and curbs have spread across more than half of all states and the nation's coal-dominated energy system is expected to come under further strain as power demand tops a recent record high in the coming weeks.

Even with a temporary reprieve from a blistering heat wave that's delivered temperatures as high as 46 degrees Celsius (115 degrees Fahrenheit), households and businesses face ongoing disruptions as coal stockpiles shrink at power plants and fuel imports falter on prices that've surged since the war in Ukraine.

“It's becoming a difficult situation,” Sumant Sinha, chairman of ReNew Energy Global Plc, a supplier of wind and solar power in India, said in an interview. “The whole summer will be a test.”

High coal and oil prices threaten to add to inflationary pressures that prompted India's central bank to make a surprise move Wednesday to lift its key policy rate. Power curbs will also hit India's already faltering rebound in industrial production.

Read more: Heat Waves Test the Limits of Human Survival: Pollard & Fickling

Production of coal, the fossil fuel that accounts for more than 70% of India's electricity generation, has failed to keep pace with unprecedented energy demand from the heat wave and the country's post-pandemic industrial revival. Logistics snarls, including a lack of railway carriages to transport the fuel from mines to power plants, are exacerbating the shortages.

“If power supply is curtailed to the industrial sector, it could delay the recovery in the manufacturing sector by at least one more quarter,” said Aditi Nayar, an economist with ICRA Ltd.

Stockpiles at coal-fired power stations have tumbled more than 14% since the start of April, leaving about 100 plants with critical supply levels, according to the Institute for Energy Economics and Financial Analysis. Reserves are forecast to shrink further on high demand, and that'll be followed by a monsoon season from July.

Monsoon rains triggered a previous power crisis last year — which also caused widespread electricity curbs — when coal mines and roads were flooded, hampering production and shipments.

“If coal stockpiles continue to deplete at this rate, we're going to see a full-blown power crisis across the country,” said Shailendra Dubey, chairman at the All India Power Engineers Federation, an advocacy body that produces energy policy suggestions.

Electricity demand hit a record 207.1 gigawatts on Friday and is expected to rise to 220 gigawatts within the next two months, according to India's power ministry. Average spot power prices at Indian Energy Exchange have jumped to about 10 rupees (13 cents) a kilowatt hour, almost triple the average in January, and have been capped by the industry regulator.

At least 16 of India's 28 states have been grappling with power outages of between two and 10 hours a day, Ashok Gehlot, chief minister of Rajasthan, said Monday in a Twitter message, before conditions eased in some areas.

The western desert state, a hub for metal smelters to textile factories, last week ordered power supplies to some industries cut by as much as half. Citizens should limit their use of appliances like air conditioners and coolers in homes and workplaces, Gehlot said.

Maharashtra, home to the nation's financial capital Mumbai, is battling worsening blackouts, said S. Maheshkumar, general secretary at Maharashtra Industrial and Economic Development Association. “Industries are worried that they may have to cut production and turn down export and domestic orders,” he said by phone.

Anger over patchy electricity supplies prompted protests across the northern state of Punjab — India's top grains producer — over the weekend, with farmers blockading roads as they appeal for a minimum of eight hours of power a day for agricultural use. Already there are concerns about electricity supply during a paddy sowing season from mid-June, Kamaljeet Singh Hayer, a farmer in the state's Ferozepur district, said by phone.

In the coal mining states of Jharkhand and Chhattisgarh, many industries are cutting output or running back-up generators with expensive diesel. “If we have to operate like this, we'll all soon be in the red,” said Philip Mathew, president of Jharkhand Small Industries Association.

Opposition party members marched Saturday through streets in Jammu, protesting against six-hour daily outages. Blackouts have struck key population centers including Uttar Pradesh, and even where supplies are slowly improving like in Karnataka and Kerala connections still aren't guaranteed around-the-clock.

While Prime Minister Narendra Modi's government isn't yet facing major new dissent, India's economy is under pressure from high energy prices, rising inflation and the impacts of the Covid pandemic, including low employment, said Shumita Deveshwar, senior director of India research at TS Lombard.

“These have the potential to become bigger political issues in the longer-term,” Deveshwar said. “If the coal crisis continues for an extended period, it will add to the pressure.”