Tales from the dark subcontinent
Friday, 3 August 2012
TO SEE the future of Australian coal, go to India. But, before making the trip take the advice of Hogsback and pack a kerosene lamp for the dinner table, and a battery-powered night light for reading in bed because a chronic coal shortage in India has led to its worst ever blackouts.
What happened across the north and east of India in late July was a fabulous reminder to the anti-coal crusaders that if they think the world can function properly, and at an affordable cost without burning coal, they had better think again.
For proof, ask any of the estimated 680 million Indians plunged into darkness when their power grid collapsed. While blackouts in the overcrowded cities of India are nothing new, the two days of darkness set a benchmark for inconveniencing people and industry.
Recriminations are, naturally, in full swing. The central government has accused the states of breaking the rules and drawing electricity above their allocation in the nationally administered grid.
The states accuse the new crop of privately-run power stations of not generating enough electricity to meet demand at the peak of summer when air conditioning use is at its higher.
The power station operators accuse Coal India, the national coal-buying monopoly, of not acquiring enough coal from local mines, or from not importing enough. Whatever the reason, some power stations are simply running out of coal or only have a day or two on site.
Local coal miners say Coal India is not paying enough for them to crank up output, with the domestic coal price estimated to be between 40% and 70% lower than that paid for imported fuel.
Penny pinching by Coal India, which is 80% government-owned, also means it has been slow to build up its importing business.
One example illustrates how daft the system is. Every day, India’s states are supposed to tell the central power authority how much power they will draw the following day, and to keep to that estimate.
They don’t, of course, because hardly anybody in the world can accurately predict power consumption a day in advance. You might get close, but you will never be on the mark, and in India there is the added challenge of losing an estimated 30% of all electricity produced in a clapped-out distribution system, or by theft.
According to reports from India, presumably written on a manual typewriter or a quill dipped in ink, some states were exceeding their power allocation by up to 20% – causing the entire grid to collapse.
By now, you get the picture. It is an India 101 case study of chronic mismanagement, responsibility-dodging, and an inability to make simple decisions. This is pushing the world’s next great economic hope, after China, back into the dark ages – literally.
Everyone, as ever, has a plausible explanation as to why they failed to perform as promised. However, from the perspective of the international coal industry it really does not matter whether this was just another IWA (India Wins Again) experience, or something more significant.
The point is that coal lies at the heart of Indian power generation, whether from the grossly-inefficient public power-generating sector, or from the private power stations that account for an estimated 22% of northeast Indian power production.
So, what next? From a coal-demand perspective, India is one of several good news stories unfolding around the world.
First step will be enormous political, industry and consumer pressure on Coal India to acquire more coal and to get it to the power stations.
One solution will be to pay local miners more, but that will not provide everything India needs to meet electricity demand, which has been growing at between 6.5% and 8% a year.
Another solution is to buy more coal on the international market, paying whatever is demanded to simply keep the lights on, with a secondary consideration being to encourage Indian companies to step up their international coal-investment efforts.
India, from what The Hog can see, is an early wake-up call that will soon be heard in other countries. That includes that most orderly of countries, Germany, where an electricity revolution is being attempted, but is likely to fail.
The great German experiment is to phase out nuclear power, and replace it with wind and solar. Put simply, it is not working. The nuclear plants are shutting, but the shortfall is simply being met by nuclear-powered electricity imported from France.
It is only a matter of time before France decides it needs to keep its electricity for its own hard-pressed industry – and that will give Germany a choice. It will have to restart nuclear or burn more coal.
Times have been tough for the global coal industry lately. India, and Germany to come, are reminders that the future remains bright – or dark, if you are in India.
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