In May, India witnessed its most significant drop in coal-fired electricity production in half a decade.
This decline coincided with the first decrease in total power demand since August and a record surge in renewable energy output, according to a Reuters analysis, which quoted official data.
Federal power grid regulator, Grid India’s data indicates a substantial drop in natural gas-fired power generation, the largest in almost three years.
This decline is attributed to increased electricity production from cleaner sources such as hydro and nuclear power.
India, a major player in the global energy market as the second-largest coal importer and fourth-largest LNG purchaser, is experiencing a decrease in fossil fuel demand for electricity production.
This reduction coincides with a period of significant price volatility and pressure on benchmark fossil fuel prices.
Decline in fossil fuel demand
Indian coal trader I-Energy said in a note:
Demand from the power sector – typically strong during peak season – remained limited.
Additionally, economic headwinds have weighed on non-power industries.
Asian spot LNG prices have decreased by over 15% this year.
Simultaneously, thermal coal benchmark prices have plummeted to their lowest levels in over four years.
These declines are attributed to reduced demand from China and India, the largest global coal importers.
Grid India’s data analysis reveals a significant 9.5% year-over-year drop in India’s coal-generated power during May, totaling 113.3 billion kilowatt-hours (kWh).
This decline in coal-generated power represents the most substantial annual decrease since June 2020’s nationwide COVID-19 lockdown.
India sees a historic drop in coal power generation in May as renewable energy reaches record highsThe world’s third-largest greenhouse gas emitter may see a significant reduction in emissions due to a prolonged decrease in fossil fuel demand for power generation.
This shift comes after the country increased its coal dependence to fuel post-pandemic economic recovery.
To justify its extensive use of coal, India has consistently emphasised its lower emissions per person when compared to more affluent countries.
Cutting reliance
Driven by ample coal reserves and diminished electricity demand growth, Chinese and Indian utilities have further decreased their reliance on coal and LNG imports this year.
Due to surging temperatures and elevated power demand, India had allowed the operation of gas-fired power plants throughout 2024.
Moody’s ICRA vice president, Prashant Vashisth, stated that due to reduced power demand and elevated gas-fired power costs rendering it less competitive against alternatives like solar, utilities are expected to decrease their purchase volumes this year.
May saw a 5.3% year-on-year decrease in total electricity generation, reaching 160.4 billion kWh.
Peak demand also declined by approximately 8% compared to the previous year, registering at 231 GW.
Government officials attributed this reduction primarily to milder temperatures.
In May 2024, a heatwave drove peak electricity demand to 250 GW, reflecting the highest electricity requirement during that period.
Renewable energy surge
Also, May saw renewable energy production reach an unprecedented 24.7 billion kWh, marking a 17.2% year-over-year increase.
This growth elevated renewables’ contribution to the total power supply to 15.4%, the highest percentage recorded since 2018.
India’s electricity generation saw coal’s contribution decrease to 70.7% this May, Grid India reports. T
his is a drop from 74.0% the previous year and marks the smallest proportion of coal-generated power since June 2022.
Hydropower production saw a significant increase, rising 8.3% to 14.5 billion kWh.
This surge elevated hydropower’s contribution to total power generation to 9.0%, up from 7.9% in May 2024, as indicated by the data.
In May, natural gas-fired power generation experienced a significant drop, plummeting 46.5% compared to the previous year.
This resulted in an output of only 2.78 billion kWh, representing the largest annual decrease since October 2022.
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