Are Power Cuts the New Pandemic?

First came Europe. Then China. And now India. Recent power cuts in October was over 21 times the deficit this time last year.

For a country with a population of 1.39-billion, India is the second highest ranking consumer of coal in the world. And it’s the world’s second largest importer of coal despite being home to the fourth largest coal reserves in the world. 

But you’d never know this, going by recent events. 

Low coal stocks have over half of India’s 135 coal-fired power plants running on fumes. Considering 70% of Indian electricity is generated using coal, this will undoubtedly impact the country’s post-covid recovery. 

Similar to China’s recent coal crisis – albeit for different reasons – which has left the country of 1.4-billion unstuck due to its reliance on coal for power generation, power cuts have been rife leaving millions of homes and businesses without electricity. 

Any nation’s population can be linked to the rate of the adoption of new technologies and devices. It’s a simple formula: the more people there are, the greater the power consumption. So, what can be said for heavily populated nations that are struggling to meet their power demands?  

 

RUNNING SHORT (OR ON EMPTY) 

Population aside, there are several reasons why power is currently in such short reserves in India. Let’s review just some of them. 

  • As the post-covid recovery begins, so does resuming life as we knew it. People are commuting again, schools are open, gyms and restaurants are back to business as usual. Demand has suddenly boomed as countries open up.
  • Heavy monsoon seasons cause floods and prevent temporarily halt mining, reducing domestic coal production and preparation.
  • The well-intentioned efforts to make the shift to renewable sources have failed to meet energy needs, causing many countries’ coal plants to close. Consequently, gas stockpiles have dropped below pre-pandemic levels.

“Coal is really expensive now,” Economist, Nomura 

 The basic principles of supply and demand have been turned on its head. The supply of power has fallen short against the booming demand of power in several densely populated regions across the globe. Which can only result in market volatility and soaring prices. 

 

 

WHAT DOES THIS MEAN FOR ENERGY TRADERS?

Coal is fossil fuel formed and naturally processed over millions of years. Depleting resources, the complex and costly process of mining and preparation, and the high levels of electricity consumption in emerging economies have significantly affected the price of coal.  

Having a pulse on market fluctuations positions organizations to hedge smarter and reduce their exposure to market volatility, making them less vulnerable to financial instability and loss. 

CTRMCloud partners with trading companies to optimize their risk strategies, equipping them with the tools and expertise to trade with confidence. Even during turbulent times. 

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