India likely to boost coal power as LNG supplies tighten amid Middle East crisis

India is likely to rely more heavily on coal-fired power generation to meet peak electricity demand this summer as liquefied natural gas (LNG) supplies tighten following shipping disruptions linked to the U.S.-Israeli war on Iran, two industry officials said, as reported by Reuters.

The Indian government typically asks power plants to ramp up output during the April–June summer period, including gas-fired generation, to meet surging electricity demand. Authorities also subsidize higher generation costs to shield consumers from rising power prices.

However, the government has so far received no bids from power producers to supply 12,000 megawatt-hours of gas-based electricity for the summer months, according to an official familiar with the matter. The tender is scheduled to close within the next two days.

Another official said the power ministry is seeking to maximize coal-fired generation by bringing plants out of planned maintenance outages and advising operators to avoid shutdowns during the peak demand period.

State-owned utility NTPC Ltd has already informed India’s grid regulator that it will not be able to supply gas-fired electricity during the April–June period, according to two company sources. NTPC and the federal power ministry did not respond to Reuters requests for comment.

Read also: India aims to cut thermal coal imports by 30% this year

India has invoked emergency provisions and declared force majeure, reprioritizing natural gas supplies to critical sectors such as households and fertilizer plants.

Petronet LNG Ltd, India’s largest gas importer, has also issued a force majeure notice to customers including GAIL (India) Ltd, Indian Oil Corp and Bharat Petroleum Corp after LNG supplies from Qatar and Abu Dhabi National Oil Company were disrupted.

India has about 20 gigawatts (GW) of gas-fired power capacity, which normally operates at 6–10% utilization due to high LNG costs, although this typically rises to about 30% during the summer months.

Even if peak power demand reaches 250–260 GW this summer, India is unlikely to face major power shortages thanks to ample coal, lignite, nuclear, hydro and wind generation capacity, said Gautam Shahi, senior director at Crisil Ratings.

Coal accounts for nearly 75% of India’s electricity generation.

“India’s thermal coal market is seeing steady import demand, particularly for coal grades used by power producers,” said Vasudev Pamnani, director at Gujarat-based coal trader i-Energy Resources.

Editing by Reiner Simanjuntak