New Delhi: India’s power sector is facing tighter supply conditions as electricity demand remains strong, hydropower generation disappoints and coal inventories at thermal power plants continue to decline. HSBC has highlighted the growing pressure on the country’s power system, while renewable energy generation has helped bridge part of the gap created by weaker hydro output.

According to HSBC’s latest assessment, coal stocks at Indian power plants had fallen to less than eight days of availability as of September 23, down from already low levels in August. Around 40% of thermal power plants were operating with critically low coal stocks of less than 25% of the required inventory.

The situation comes at a time when electricity demand continues to remain elevated. The combination of higher consumption, weaker hydropower generation and constrained coal inventories is putting greater importance on renewable generation and efficient management of thermal power capacity.

Power demand remains strong

India’s electricity demand has continued to rise through the current period, following unusually high temperatures and weaker-than-normal monsoon conditions.

HSBC said power demand continued its strong run into September. The increase has been particularly important during periods when renewable generation is unable to fully meet demand, including evening hours when solar power generation falls.

Crisil Intelligence had earlier reported that India’s power demand reached a record around 169 billion units in August, the highest-ever consumption for the month. Demand was supported by higher cooling requirements amid elevated temperatures and below-normal rainfall.

Power generation also increased significantly during August. Crisil estimated generation rose 12.6% year-on-year to around 180 billion units, supported by higher renewable and coal-based generation.

The strong demand has consequently increased pressure on fuel supplies for thermal power plants.

Coal stocks fall below eight days

Coal availability has emerged as one of the key concerns for India’s thermal power sector.

HSBC said coal stocks at power plants had fallen to less than eight days of availability by September 23. Around four in every 10 thermal plants were operating with critically low stocks, according to the brokerage’s assessment.

The latest position represents a further deterioration from August. Crisil Intelligence reported that coal inventories at thermal power plants had fallen by about 42% year-on-year to 29 million tonnes in August, compared with 50 million tonnes a year earlier.

Coal stock cover consequently declined to nine days from 17 days a year earlier, marking the lowest level in 34 months.

The Central Electricity Authority’s subsequent data showed the pressure continued into September. By September 19, coal inventories at thermal power stations had fallen to 22.9 million tonnes, equivalent to only seven days of cover. As many as 74 of 190 thermal power plants were classified as having critically depleted stocks.

Weak hydropower adds to pressure

The coal-stock situation has become more significant because hydropower generation has not provided the expected level of support.

HSBC said evening peak stress was rising as hydro generation disappointed. Hydropower can be particularly useful in meeting periods of high demand because generation can be adjusted according to system requirements, whereas solar generation is concentrated during daylight hours.

Crisil’s August analysis showed that hydropower generation declined 9% year-on-year. The weaker output was linked to below-normal rainfall during the monsoon period.

The reduction in hydro generation meant that other sources had to compensate for the shortfall. Coal-based generation therefore remained important even as coal inventories were being drawn down.

Renewables help bridge the gap

Despite the pressure on conventional power sources, renewable energy has emerged as an important support for India’s electricity system.

HSBC said renewable generation increased by around 40% in August, helping limit the need for thermal generation. The brokerage also noted that the share of thermal power in the overall generation mix fell to a decade-low level for the month.

Crisil similarly reported strong growth in renewable generation during the April-August period, with renewable output increasing 20.7% year-on-year.

However, renewables cannot completely remove the need for thermal power because solar and wind generation depend on weather conditions and time of day. This becomes particularly relevant during evening peak periods, when solar output declines while electricity consumption can remain high.

The result is greater pressure on thermal generators to maintain adequate fuel stocks and remain available when required.

Monsoon affects coal production and transportation

The decline in coal inventories has not been attributed solely to increased consumption. Weather-related disruptions have also affected mining and transportation.

Crisil said prolonged rainfall across the eastern coal belt disrupted mining operations and coal evacuation. While coal production and transportation continued, the pace of replenishment at power plants did not keep up with the increase in consumption.

During April-August, coal consumption by thermal power plants rose about 8% year-on-year to 395 million tonnes, while coal rake loading increased by only around 5% and coal receipts by about 3%.

This mismatch between consumption and replenishment contributed to the sharp decline in inventories.

The issue therefore involves both higher electricity demand and logistical constraints in moving coal from mines to power stations.

August coal production also weakens

Domestic coal production has also come under pressure.

HSBC noted that August coal production declined by 13% year-on-year, adding another concern for thermal generators that depend on domestic supplies.

Separate government data showed India’s overall coal output declined 3.8% year-on-year in August, while electricity generation increased 11.6%. The divergence between coal production and electricity generation highlights the pressure on the energy system.

The government and coal producers have been taking steps to improve supplies, including measures to increase transportation and coal availability for power plants.

However, the replenishment challenge remains important as long as electricity demand stays elevated.

Power prices face pressure during peak hours

The tighter supply situation is also visible in India’s electricity market.

The Indian Energy Exchange’s high-price day-ahead market reached its maximum price ceiling of Rs 20 per unit frequently during September, according to industry reports. Strong demand combined with tighter supply during non-solar hours has contributed to the elevated prices.

The development highlights the difference between total electricity generation and the availability of power at specific times of the day.

Even when renewable generation is strong during daylight hours, the system can face greater pressure after sunset. This makes adequate thermal fuel stocks and flexible generation capacity important for meeting evening demand.

Outlook for India’s power sector

India’s power situation is therefore being shaped by several factors at the same time: strong electricity demand, weaker hydropower generation, falling coal inventories and disruptions affecting coal production and transportation.

Renewable energy is helping offset some of the pressure, with strong growth in generation during August. However, the intermittent nature of renewable power means thermal plants remain important for ensuring supply during periods when solar and hydro generation are insufficient.

The immediate focus for the power sector will be on rebuilding coal inventories, maintaining adequate thermal capacity and managing peak-hour demand. The pace at which coal supplies recover will be particularly important if electricity consumption remains elevated through the coming months.

For now, the data points to a tighter power equation in which demand is rising faster than some conventional supply buffers can comfortably accommodate. Renewable generation is providing significant support, but coal availability and evening peak requirements remain key factors to watch.