The Why and Impacts of the Energy Crisis

Why is there an Energy Crisis ? 

Renewables do not supply enough energy to replace coal and natural gas. 

Ageing, less efficient coal plants had been shut down in parts of the world and that has also led to power shortages. 

Price of coal and natural gas (the latter used to produce power and also heat homes in the developed world) has risen 250-300 % over one year. There are shortages of both in Europe, China and India. 

Australia, Indonesia, South Africa etc. are big exporters of coal, and countries are vying to get shipments from them. 

Energy prices to customers are controlled in many regions of the world and energy producers are suffering catastrophic losses as a result of the price rise. They have stopped / reduced importing coal / natural gas. Many countries are contemplating supporting such energy companies tide over some of their losses. 

Shipping vessels which bring the coal have also been in short supply all over the world for many reasons.

The emerging impacts of the energy crisis

India meets around three-quarters of its demand locally, but heavy rains have flooded mines and key transport routes. Coal inventories at Indian power plants fell to around 8 million tons at the end of September, about 76% less than a year earlier.

A lack of coal means factories could shut in India. Supplies to power plants are currently short by between 60,000 and 80,000 tons a day on the impact of the prolonged rains that have drenched coal pits. More than half the power plants are on alert for outages.

Supplies of coal are being diverted away from key customers including aluminum smelters and steel mills.

“Until supplies stabilize completely, we are likely to see power outages in some pockets, while customers elsewhere may be asked to pay more for power,” said a Director at ratings firm Crisil.

 In China, industrial users of natural gas including makers of ceramics, glass, and cement may respond by raising prices. If Chinese factories have to contend with widespread power shortages, global prices for steel and aluminum will jump. 

Economies that can’t afford the fuel—such as Pakistan or Bangla­desh—could simply grind to a halt.

“If the winter is actually cold, my concern is we will not have enough gas for use for heating in parts of Europe,” the US State Department’s adviser for energy security said.

The stage is set for an all-out scramble among Asia, Europe, the Middle East, and South America for shipments of LNG from exporters such as the Qatar, Trinidad and Tobago.