Black and green duo resist price surge

India's reliance on an unlikely partnership — between domestic coal and rapid renewable energy expansion — could shield it from global power tariff shocks as fuel prices surge

- SUDHEER PAL SINGH

The ongoing conflict in West Asia has disrupted more than a dozen top power markets globally.

Asian spot prices for liquefied natural gas (LNG) have surged 94 per cent, while coal prices have increased 30 per cent since February 28, when the conflict started, pushing up local retail electricity prices to record levels.

However, there is a silver lining for India. If deescalation enables fuel price moderation after 2-3 months among the 13 global markets, India will see the lowest increase in average cost of generation at only $0.1 per megawatt hour (Mwh). By comparison, Italy, Japan, and South Korea will likely experience the highest impact with $4.3 per Mwh in average cost escalation, or an 80 per cent jump, according to an analysis by Wood Mackenzie, an energy and natural resources research firm.

The main reason: Coal. Typically denigrated as a dirty fuel, coal has acted as a saviour for India, which will benefit from its predominantly domestic coal supply, with only 5-6 per cent of power generation exposed to imported fuel disruptions (mainly gas).

An additional helper is renewable energy (RE), which has seen a rapid buildup in recent years, together making for an unlikely but useful partnership in India's energy horizon. While coal-use has long been censured for its role in climate change, RE is widely seen as the way to create a green future for the world.

Winners and losers

Other key power markets which are set to remain insulated include China, for reasons similar to India; the US, for its high domestic production of both coal and natural gas which ringfences its power sector from external price volatility; and Brazil, which has developed near 80 per cent penetration of RE— predominantly hydro — which reduces its fossil fuel dependence.