MonitorsPublished on Sep 11, 2022
Energy News Monitor | Volume XIX, Issue 9
Quick Notes

High Energy Prices: The West joins the Rest with Subsidies and Handouts


Since early 2021, crude oil prices doubled, coal prices quadrupled and natural gas prices (in Europe) increased by over seven times. Between January 2020 and April 2022, the World Bank’s energy price index increased by over 76 percent and crude oil prices increased by 350 percent in nominal terms, the largest increase for any equivalent two-year period since the 1970s. In real terms, coal and European natural gas prices have reached all-time highs and remain substantially above their previous peak in 2008.

Overall energy prices are expected to increase by 50 percent on average in 2022. Coal prices, natural gas prices and crude oil prices are projected to increase in 2022 by 81 percent, 74 percent (average of the European, Japan, and U.S. benchmarks), and 42 percent, respectively. Energy prices are expected to remain higher for longer with the prices of energy commodities 46 percent higher on average in 2023 relative to January 2022 projections.

As demand for energy is inelastic in the short run, high energy prices have led to significant declines in household purchasing power across the world. The impact varies considerably across households with the poorest hit the hardest. Many western governments have responded by imposing tax cuts and price caps, and by offering rebates to shield the most vulnerable households from the sharp rise in gas and electricity prices. High energy prices are not new to the rest of the world, especially in India whose citizen’s energy prices have always been high relative to average household incomes.

Subsidies of the West

In the west, energy poverty is understood as the inability to maintain household comfort. In 1991, the United Kingdom (UK) defined an energy-poor household as one that needs to spend more than 10 percent of its income on fuel to maintain an adequate level of warmth. Drawing on UK’s definition, the EU noted that poverty occurred when energy bills represent a high percentage of consumers’ income, affecting their capacity to cover other expenses. According to the EU (European Union), energy poverty is a widespread problem because 50–125 million people were unable to afford proper indoor thermal comfort.

To address the exceptional rise in energy prices and the impending energy poverty in many households, which is expected to increase in winter, most of the Western world has offered emergency income support to households, state aid for companies, and targeted tax reductions for taxpayers. The European Commission (EC) has released a toolbox for EU member states to address energy poverty recommending handouts and subsidies.  These payments are far more than what an average household in the rest of the poor world can expect to earn in a year.

The US federal government is providing more than US$8.3 billion to help families and individuals with their home energy costs, including summer cooling, through the low-income home energy assistance program (LIHEAP). The British government announced a support package of GBP 15 billion that covers a rebate of  GBP 550 each for around 28 million households. All domestic energy customers in Britain are expected to receive a GBP 400 grant to help with the cost of their energy bills through the energy bill support scheme.

France has offered an “energy cheque” worth between 48 euros and 277 euros for eligible households, according to their income and size of the household. France has also forced EDF the electricity utility to limit electricity wholesale price rises to 4 percent for a year. The country’s domestic tax on final electricity consumption has also been curbed from 22.50 euros/MWh (megawatt hour) to only 1 euro/MWh for households, and 0.50 euros/MWh for businesses.

Italy approved a new aid package worth around 17 billion euros to help shield firms and families from surging energy costs and rising consumer prices. Spain has cut value-added tax (VAT) on energy bills from 21 percent to 10 percent, whilst also cutting an existing tax on electricity from 7 percent down to 0.5 percent. Portugal and Spain have put a one-year long cap on gas prices, which ensures they remain lower than an average of 50 euros/MWh.

In the Netherlands, where the average yearly energy bill for households was expected to increase by 1,264 euros, support measures for all households including lower energy taxes and an increase in the lump sum discount on energy bill taxes was offered. On top of that, low-income households were offered an additional 800 euros of support through the municipality.  The government is also lowering VAT on energy from 21 percent to 9 percent and cutting duty on petrol and diesel by 21 percent, until the end of the year.

Denmark is offering a cash handout to the elderly and other measures totalling 417 million euros, including a cut to a levy on power prices. A “heat cheque” worth 269 million euros will be paid to over 400,000 households hit hard by rising energy bills.

Germany has pledged to lower VAT on natural gas from 19 percent to 7 percent until the end of March 2024. Germany also approved two relief packages for a total of 30 billion euros to help its citizens with rising energy prices this year. The German government will offer a one-off energy price flat rate of 300 euros to all taxpayers with poor families getting more. Similar hand-outs, tax rebates, and subsidies are being offered by all member countries of the EU.

Subsidies of the Rest

The justification for government intervention in the energy markets of the West is that of market failure to prevent sudden disruptions to energy supply that can increase energy prices. Energy prices have a disproportionate impact on the economy and society because energy is an essential input in all goods and services, and also is part of every household’s budget. Spikes in energy prices will reduce consumer demand, discouraging businesses from hiring and investing all of which will have detrimental effect on the economy.

For the rest of the developing world where energy poverty is simply the lack of access to modern energy sources, the justification of energy subsidies is that it provides access to energy to the poor. Though this is true to some extent, it comes at the cost of wider social spending.  India, where energy subsidies and handouts have been a part of social spending for over five decades, offers an interesting case study.  India has used market distorting price interventions in the past to limit energy price increases, especially for petroleum products, and to ease access to electricity and liquid petroleum gas (LPG). But product specific price discounts have largely been phased out. Currently there are no net subsidy pay-outs in the petroleum sector as tax-take on petroleum products is an order of magnitude larger.

However, political parties continue to offer free or low tariff for electricity and free LPG connections through programmes such as Ujjawala yojana just before regional or central elections. An empirical study of energy subsidies in 109 low-and middle-income countries showed that high energy subsidies and low social spending emerge as an equilibrium outcome in the political game between the elite and middle classes, the poor and the politician. Support handouts for the poor such as free electricity and LPG connections because they are small but certain immediate benefit to consumption, whereas the delivery of public goods such as soft and hard infrastructure for education and healthcare is highly uncertain. The poor who outnumber the rich in India reward the politician with favourable electoral outcomes. The elite and middle classes welcome energy handouts and subsidies because they consume much more energy than the poor and consequently appropriate most of the price subsidies.  More importantly, they are in favour of low social spending for the poor which could erode the financial status of the economy affecting their investments. The study quoted above found that public expenditures in education and health were on average lower by 0.6 percentage point of GDP (gross domestic product) in countries where energy subsidies were 1 percentage point of GDP higher. The study also found that crowding-out of social spending was stronger in the presence of weak domestic institutions, narrow fiscal space, and amongst the net oil importers. India unfortunately qualifies on all counts. But India’s hand-outs and subsidies have enabled it to attain much higher electrification rates and also facilitated a faster shift away from biomass to LPG compared to countries with comparable per-person incomes.

The key takeaway for the West is that its persistent call for phasing out energy subsidies in poor countries should be reviewed in the light of its own indulgence in subsidies. The takeaway for the rest is that subsidies and handouts are not a substitute for development, income generation and overall improvement in quality of life.

Source: Breugel

Monthly News Commentary: Power

Free Electricity Persists in Poll Promises


Regulation and Governance

Delhi Chief Minister and Aam Aadmi Party’s (AAP) national convener Arvind Kejriwal promised that his party will provide free electricity up to 300 units per month if voted to power in Gujarat where the Assembly polls are slated to be held later this year. He said that power dues upto December 2021 will be waived off if AAP is voted to power in the state where the BJP has been in power since 1998. The free electricity scheme will be implemented in Gujarat within three months after the assembly elections, he promised. He guaranteed uninterrupted power supply 24/7 without any load shedding or cut in supply. He further wondered why the BJP government in Himachal Pradesh has announced free power to the people if it was against the idea.

Delhi Chief Minister (CM) said that those getting power subsidies will remain unaffected by any changes in power purchase agreement cost in Delhi. Delhi Electricity Regulatory Commission (DERC) gave its approval to power distribution companies to hike the electricity charges by up to four percent due to increase in power purchase agreement cost (PPAC) owing to the surge in the prices of coal and gas. The new rates have come into effect from mid-June. PPAC is a surcharge applied on total energy cost and fixed charges to compensate the discoms (distribution companies) for variations in the market-driven fuel costs. The hike in power purchase agreement cost will lead to a rise in Delhi government’s power subsidy bill, which has been estimated at INR32.5 bn (US$ 408 million) in the current fiscal. More than 80 percent of power consumers are covered under the government’s subsidy scheme.

The Delhi government has again urged the Union power ministry to allow it to retain its existing share of 728 Megawatt (MW) in the Dadri-II power plant to ensure there is no electricity shortage in the national capital. In a letter to the ministry, the government said the power purchase agreements executed between its power distribution companies and NTPC Ltd for a committed supply of 728 MW from its plants, including Dadri II, were valid till 30 July 2035. The ministry, in its 28 June 2022 order, reallocated around 500 MW of power to Haryana and the remaining 228 MW to Delhi. The arrangement is valid till 31 October 2022. The ministry said this April that the then Delhi Power Minister, Satyendar Jain had surrendered power from 11 central generating stations, including Dadri stage-II, with immediate effect. The Delhi government, however, contends that the entire scenario of power requirement has changed this year.

The Delhi power department released a standard operating procedure (SOP) having online and offline forms for consumers who want to avail benefits of its subsidy scheme after 1 October. The Delhi CM in May announced that from 1 October, power subsidy would be provided to only those consumers who specifically demand it. The released SOP will be implemented for seeking consumers’ replies on whether they want to avail of power subsidy. He had said that many people feel that they can pay their power bills without the subsidy and the money thus saved could be spent on developing schools and hospitals in the city. Domestic consumers who use up to 200 units of electricity in a month get 100 percent subsidy. Such consumers number around 30.39 lakh. Further, the Delhi government provides 50 percent subsidy (up to INR800) to over 16.59 lakh consumers who use 201-400 units per month.

Punjab Chief Minister Bhagwant Mann said around 51 lakh households in the state will receive zero electricity bills and asserted that the promise of 300 units of free power has been implemented from 1 July. The AAP-led government had earlier announced that it will provide 300 units of free electricity to every household from 1 July. Giving 300 units of free electricity was one of the major poll promises of the AAP during the Punjab assembly elections. The party’s national convener Arvind Kejriwal had promised free electricity of up to 300 units per household in the state in June last year. Kejriwal had also promised a waiver of pending electricity bills, and a round-the-clock power supply in the state. In April, Mann said if electricity consumption exceeds 600 units in two months, then a consumer will have to pay for the entire power usage. However scheduled castes, backward castes, below-poverty-line households and freedom fighters will be charged just for over and above 600 units, the Punjab CM had then clarified. Punjab has a two-month billing cycle for power supply.

Discom Reform

Tamil Nadu is raising electricity tariffs for all customers after eight years, but experts said the state needs to make an additional 10-15 percent hike to revive the power sector. The DMK government raised rates by 12 percent to 52 percent. Based on the new tariff, consumers who paid INR170 for 200 units will pay INR225. Those who paid INR4,420 for 900 units will pay INR5,550. According to the state electricity ministry, the tariff hike is a result of the previous AIADMK government not taking up power sector reforms in the last ten years. Of the INR1.04 trillion (US$ 13.06 bn) discoms (distribution companies) nationwide owe to power generation companies, Tamil Nadu’s share is 25 percent or INR257.6 bn (US$ 3.24 bn). Separately, dues to the power sector comprise more than 28 percent of Tamil Nadu’s overall debt.

The Uttar Pradesh­ energy department has received a proposal for setting up China-made equipment used for assimilation of power consumption in the multi-point electricity metering system in Madhyanchal Distribution Company. The proposal crucially runs contrary to the Union Ministry of Power’s guidelines which apprehend the vulnerability of power supply systems and networks due to cyberattacks through malware embedded in the “imported” equipment. The proposal has been moved by a Noida-based company Capital Power System Ltd for installing a “gateway unit” between smart meters in residential apartments and the Uttar Pradesh Power Corporation Limited (UPPCL). If installed, the China-made equipment will work as an interface in apartments constructed in 19 districts, including Lucknow, Ayodhya, Budaun, Bareilly, Pilibhit, Shahjahanpur, Lakhimpur Kheri, Hardoi, Sitapur, Unnao, Bahraich, Shrawasti, Balrampur, Gonda, Barabanki, Rae Bareli, Sultanpur, Ambedkarnagar and Amethi. According to the proposal, the gateway has been procured from one Bay Area Compliance Laboratories Corporation, Shenzhen, China. It is a Bluetooth and Wi-Fi device. The gateway receives information from the smart meter and passes it on to the “head end system or systems” (HES) installed with the UPPCL. Information to the meter by HES also passes through the gateway – hence it supports bi-directional communication.

The Rajasthan government will issue over 4.88 lakh new and pending agriculture power connections in the next two years, Chief Minister Ashok Gehlot said. He said that his government is committed to providing cheap electricity to farmers along with an uninterrupted power supply in the state. He added that due to efficient power management of the state government, there was minimum power outage in the state despite the scorching heat.

The Joint Electricity Regulatory Commission (JERC) has directed the Chandigarh UT (Union Territory) administration to expedite the smart grid pilot project and submit the progress report to the commission in one month. These directions came in the recent power tariff petition order issued by JERC. The UT electricity department has submitted before the Joint Electricity Regulatory Commission (JERC) that due to acute shortage of staff and upgrade of software, the monthly billing system was not implemented in the city. In 2019 and again in 2020, JERC had directed UT electricity department to shift from bimonthly billing system to monthly billing system.

Demand Growth

The growth in India’s power demand, that closely follows economic growth, is seen growing over 6 percent for the second straight fiscal, and above the pre-pandemic levels and the long-period average growth of 5 percent. According to research and ratings agency CRISIL, this trend of above-average growth could continue for two more fiscals. The first quarter of this fiscal (2022-23) has already seen 18.7 percent on-year growth, in line with economic recovery. Also, the continuous rise in power exchange purchase bids has cranked up prices in the merchant markets to an average INR7.8 per unit in the first quarter versus INR4.4 per unit last fiscal. With demand forecast to be high this year, too, dependency on the short-term market would sustain and that should keep merchant tariffs above INR5 per unit this fiscal.


NTPC Ltd has registered a 21.7 percent growth in electricity generation at 104.4 billion units (BU) in the April-June quarter of this financial year. NTPC group of companies recorded a generation of 104.4 BU in the April to June quarter of 2022, registering an increase of 21.7 percent from 85.8 BU generated in the corresponding quarter last year. In June 2022, power generation was 34.8 BU, higher by 29.3 percent compared to 26.9 BU in June 2021, indicating an improved performance and an increase in demand for power in the current year.­


India is poised to add 27,000 circuit kilometres of inter-state power transmission networks by 2024 as it has already added 6,500 circuit kilometres or almost one-fourth of the target. The power transmission network expansion has been planned keeping in mind the ultimate goal of having 500 gigawatt (GW) of non-fossil fuel based electricity generation capacity in the county. The inter-state transmission link plays an important role in power generation capacity addition. Experts are of the view that transmission link to evacuate power from projects especially renewables should be set up much before the generation capacity is added. The power ministry had said that all Inter-State Transmission System (ISTS) lines have been mapped on the portal of the PM GatiShakti National Master Plan (NMP), which was launched in October 2021 to push infrastructure development in the country. Also, it had informed that the 90 percent under-construction ISTS lines have been integrated to the portal and the remaining 10 percent are to be integrated after finalisation of route survey by respective transmission service providers. PM GatiShakti NMP portal provides “one-click comprehensive view” to steer and simplify the planning and implementation process by reduction of time and cost of implementation in power transmission projects. The power ministry said that in addition to 27,000 circuit kilometres by 2024, India would need to build transmission lines to evacuate 180 GW generation capacity, which will ultimately help the country to realise its goal of having 500 GW of renewable energy by 2030.

­All existing inter-state transmission system lines have been mapped on the portal of the PM GatiShakti National Master Plan which was launched in October 2021 to push infrastructure development in the country. Also, it informed that the 90 percent under-construction ISTS (Inter State Transmission System) lines have been integrated to the portal and the remaining 10 percent are to be integrated after finalisation of route survey by respective transmission service providers. PM GatiShakti NMP portal will ultimately aid in solving problems of development of infrastructure in the country by building a secure, sustainable, scalable and collaborative approach towards infrastructure planning for seamless connectivity to economic zones, it stated. Prime Minister (PM) Narendra Modi launched PM GatiShakti NMP in October last year with the objective to bring different ministries/utilities and infrastructure planning under a single unified vision across all sectors such as highways, railways, aviation, gas, power transmission, and renewable energy. In the development of power transmission projects, PM GatiShakti NMP portal shall play a critical role in planning, tendering, implementation and approval stages.­

Rest of the World


The growth of global electricity demand is slowing sharply in 2022 from its strong recovery in 2021 due to slower economic growth, soaring electricity prices and health restrictions, the International Energy Agency (IEA) said. Global electricity demand is seen rising 2.4 percent in 2022, lower than the 3 percent forecast in January, and is expected to maintain a similar growth rate in 2023, down from a 6 percent rise in 2021 and in line with the five-year average prior to the COVID-19 pandemic.

Africa & Middle East

Saudi Arabia and Iraq have signed an electric power grids deal to boost economic cooperation. The deal was signed between Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud and Iraqi Oil Minister Ihsan Abdul Jabbar. Abdulaziz said that apart from enhancing bilateral economic ties, the signing of the deal will help establish Saudi Arabia as a regional hub for electric power grids and attract investment in the country’s electricity generation projects.

Europe & Russia

Greece will subsidise power bills in August at a cost that will top 1 billion euros (US$1.02 bn), its Energy Minister Kostas Skrekas said, extending financial support introduced last year to shield consumers from soaring energy prices. Greece, like many other EU (European Union) countries, is facing a sharp rise in power bills driven by sky-rocketing gas prices, as the war in Ukraine and European sanctions on Russia heighten concerns over the security of gas supplies. Athens has spent about 7 billion euros in power subsidies and other measures since September to help households, businesses and farmers pay their electricity and gas bills. Subsidies, which will be incorporated into power bills, will come in at about 1.136 billion euros in August and absorb up to 90 percent of the rise in monthly power bills for households and 80 percent of the rise for small and medium-sized firms, the Minister said.

A financial agreement was reached to build the first power cable linking Britain and Germany, with construction set to begin later this year as the two countries work to reduce dependency on Russian gas and increase the use of green energy. Named NeuConnect, the 2.4 bn pound (2.8 bn euro) project link should be operational by 2028, and at 725 kilometres (450 miles) in length, mostly under the sea, will be one of the world’s largest interconnector projects. The cables could transfer up to 1.4 GW of electricity to flow in either direction between Britain and Germany, according to a statement issued by NeuConnect. The project is financed by France’s Meridiam, Germany’s Allianz Capital Partners and Japan’s Kansai Electric Power with a consortium of more than 20 banks and financial institutions, including the UK Infrastructure Bank and the European Investment Bank (EIB).

The UK (United Kingdom) government launched a review into Britain’s electricity market, seeking ways to lower costs for consumers contending with soaring energy prices. Proposals out for initial consultation include potential changes to the wholesale electricity market to stop volatile gas prices from setting the price of electricity when renewable power is much cheaper. Under the current system, the cost of producing electricity from gas-fired power stations is usually the benchmark for setting the wholesale electricity price that helps to determine how much people pay for their energy. Benchmark wholesale British gas prices are trading about three times higher than a year ago, pushing up wholesale electricity prices by similar levels. The government said it would also look at offering incentives for consumers to use electricity when demand is lower or when high levels of wind or solar power are being generated.

European power grid network ENTSO-E will connect to the Baltic states’ grids within 24 hours if the countries were to be disconnected by Russia, Lithuanian power grid operator Litgrid said. In June, European grid operators were ready to implement immediately a long-term plan to bring the Baltic states, which rely on the Russian grid for electricity, into the EU system if Moscow cuts them off. Litgrid Chief Executive Rokas Masiulis said Lithuania was aiming for an agreement to decouple the Baltic States from the Russian power grid in early 2024, compared to a previous plan for end-2025. He said governmental discussions with Estonia and Latvia on the matter had started, and that the European Commission was also involved. Masiulis said an underwater power link between Poland and Lithuania can only be completed in 2027-2028, not in 2025 as previously planned, due to a shortage of materials. Three decades after splitting from the former Soviet Union and 17 years since joining the European Union, the Baltic states of Estonia, Latvia and Lithuania still depend on Russia to ensure stable power supplies. A project backed by 1.6 bn euros (US$1.61 bn) of EU funding to upgrade their infrastructure is in place to disconnect them from the grid by 2025.

France will fully nationalise EDF, Prime Minister Elisabeth Borne said, in a move that would give the government more control over a restructuring of the debt-laden group whilst contending with a European energy crisis. The utility has also been hurt by government moves forcing it to sell power to rivals at a discount as part of efforts to shield French consumers from a sharp increase in the cost of living. The company said output losses will reduce its core profit this year by 18.5 bn euros and the discounted power sales will cost more 10.2 bn euros. Its debt is projected to rise by 40 percent this year to more than 61 bn euros. Meanwhile, planned new-generation nuclear reactors require investments of more than 50 bn euros.


United States (US) power consumption was on track to rise to record highs in 2022 and 2023 as the economy grows, the US Energy Information Administration (EIA) said. The statistical arm of the US Department of Energy projected power demand will climb to 4,022 billion kilowatt-hours (kWh) in 2022 and 4,045 billion kWh in 2023 from 3,930 billion kWh in 2021. That compares with an eight-year low of 3,856 billion kWh in 2020, when the coronavirus pandemic depressed demand, and an all-time high of 4,003 billion kWh in 2018. The EIA projected 2022 power sales would rise to 1,486 billion kWh for residential consumers, 1,367 billion kWh for commercial customers as more people return to work in offices and 1,026 billion kWh for industrials. That compares with all-time highs of 1,477 billion kWh in 2021 for residential consumers, 1,382 billion kWh in 2018 for commercial customers and 1,064 billion kWh in 2000 for industrials.

Power demand in Texas will likely hit new all-time highs as economic growth boosts overall use and homes and businesses crank up their air conditioners to escape another heat wave. The Electric Reliability Council of Texas (ERCOT), which operates the grid for more than 26 million customers representing about 90 percent of the state’s power load, has said it has enough energy resources available to meet demand. Extreme weather is a reminder of the February freeze in 2021 that left millions of Texans without power, water and heat for days during a deadly storm as ERCOT scrambled to prevent a grid collapse after an unusually large amount of generation shut. ERCOT forecast power use would soar to 77,861 MW on 6 July and 78,532 MW on 7 July, which would top the current all-time high of 76,592 MW on 23 June.

News Highlights: 27 July – 2 August 2022

National: Oil

Indian Railways extends validity of diesel pacts by 6 months

1 August: Indian Railways has extended the validity of the diesel supply rate contracts it had signed in March 2020 by six months till the end of March 2023, a move that will protect the national transporter from sharp volatility in oil prices. These supply agreements have a clause that binds oil companies to supply diesel to the railways at below retail rates. Typically, a bulk supply of diesel would be available to large buyers like Indian Railways at rates lower than the retail prices. However, present bulk prices are higher as oil companies have not revised retail prices in line with the crude costs. Retail diesel prices were last revised on 23 May 2022. It is estimated that oil companies are selling bulk diesel to consumers such as transport fleets, shopping malls and factories at INR25-40 per litre more than retail prices. However, the railways continue to get it at cheaper rates because of this agreement. The Indian Railways had extended the validity of diesel pacts by 6 months in June 2019 and had sought bids for supplying 31.6 lakh kilo litres of diesel for one year. The estimated tender value was INR183.4 bn. Bids closed in July 2019 and rate contracts (RCs) were awarded to six companies in March 2020. Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Limited, Bharat Petroleum Corporation Limited (BPCL), and Mangalore Refinery and Petrochemicals Limited (MRPL), are the government companies that were awarded the rate contracts. From the private sector, Reliance Industries Limited and Nayara Energy Limited were awarded contracts. In June 2020, during the first wave of the COVID-19 pandemic, an amendment to the agreements removed the one-year period of validity for these contracts.

MRPL to expand petrol pump network in Tamil Nadu, AP, Telangana: Chairman

31 July: Mangalore Refinery and Petrochemicals Limited (MRPL) is looking to expand its network of petrol pumps in Tamil Nadu, Andhra Pradesh and Telangana, as it looks to tap markets in the vicinity of its refinery, its chairman Alka Mittal has said. MRPL’s petrol pump network is currently concentrated in Karnataka and Kerala. The subsidiary of Oil and Natural Gas Corporation (ONGC) has forayed into fuel retailing in a limited way, focusing on areas that are close to its oil refinery in Mangalore, Karnataka. The number of outlets owned by MRPL has since gone up to 36.

IOC to invest INR5.6 bn in West Bengal in FY23

28 July: Indian Oil Corporation (IOC) will invest around INR5.6 bn in various projects in West Bengal this fiscal. Executive director and state head of West Bengal sales office (WBSO) Pritish Bharat said that the projects include catalytic dewaxing plant at Haldia, augmentation of Paradip-Haldia-Durgapur pipeline and crude pipeline in Haldia. Of them, Haldia projects will attract INR2.4 bn. IOC will also commission a new LPG (liquefied petroleum gas) bottling plant at Kharagpur at a cost of INR2.08 bn, taking its total number to six in the state. Bharat said the IOC has a market share of 52 percent in the retail petrol and diesel and 60 percent in the LPG segment. The company has seven bulk storage tanks for petrol and diesel at Howrah, Durgapur, Haldia (two), Malda, Siliguri and Budge Budge. Bharat said the demand for petrol and diesel has seen a surge in West Bengal in the current fiscal.

Cabinet approves BPCL unit’s US$1.6 bn investment plan in Brazil

28 July: The Union Cabinet gave approval to Bharat Petroleum Corporation Limited (BPCL) to invest an additional US$1.6 billion in a Brazilian oil block. The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has approved additional investment by Bharat PetroResources Ltd (BPRL), a wholly-owned subsidiary of BPCL, for the development of the BM-SEAL-11 Concession Project in Brazil. The block is to start production from 2026-27. BPRL has a 40 percent stake in the block. Brazil’s national oil company Petrobras is the operator with 60 percent interest. Multiple oil discoveries have been made in the block, which is being developed now.

National: Gas

CNG, PNG get costlier as GAIL increases natural gas prices by 18 percent

2 August: Along with the high commercial LPG cylinder rate, the price of natural gas supplied by government-owned natural gas explorer and producer GAIL (India) Limited has also been hiked. Natural gas prices have rallied 18 percent to US$10.5 per mmBtu (million metric British thermal units). The latest hike in prices is three-and-half times that of the rate city gas companies paid for domestic supplies in March-end and nearly six times that of last August. GAIL supplies the gas, a blend of domestic and imported LNG, at a uniform rate to city gas companies, which are expected to pass on the increase to consumers of CNG and piped kitchen fuel.

CNG more expensive than petrol, diesel in Lucknow & Unnao

1 August: Creating history, CNG (compressed natural gas) is now more expensive than petrol and diesel. Green Gas Limited (GGL), the Indian oil subsidiary has hiked CNG price by INR5.3 per kg (kilogram) in Lucknow and Unnao. From 6 am (1 August), consumers have to pay INR96.10 per kg in the state capital and INR97.55 per kg in Unnao. Currently, petrol price is INR96.57 per litre and diesel costs INR89.76 per litre. This is the third hike in CNG price in the current financial year. In July, CNG cost was INR90.80/kg for Lucknow and INR92.25 for Unnao. In May, GGL hiked the price by INR2 following which CNG cost was INR87.80 per kg in Lucknow and Unnao. In April, the CNG cost was INR84.25 per kg in both cities.

National: Coal

India eases coal import targets as inventories improve in some states

2 August: India has eased coal import targets for utilities owned by state governments and private companies, according to a notice issued to government officials and private utilities. India’s power ministry has asked state government-run utilities and private power producers to assess the amount of coal needed to be imported for blending, according to a notice. Many states have stocks 50 percent above normal levels whilst others are still near critical levels, the ministry said. States, independent power producers and the coal ministry could decide on coal import percentages after assessing the availability of domestic supplies, the ministry said. The power ministry said in May that it would cut domestic fuel supplies to state government-run utilities if they do not import 10 percent of their overall requirements to blend with local coal.

Coal India’s output rises 11 percent to 47.3 MT in July

1 August: Coal India Limited (CIL) said that it produced 47.3 million tonnes (MT) of coal in July this year, registering a growth of 11 percent from the year-ago period. CIL’s output in the corresponding month of the previous fiscal was 42.6 million tonnes (MT). The company said it has maintained the double-digit rising streak for four consecutive months of the current financial year. Coal India accounts for over 80 percent of domestic coal production. The total coal offtake by CIL increased by 10 percent during the first four months of the current financial year at 232 MT, compared to 211 MT in the year-ago period. In July 2022, CIL’s total offtake increased to 54.5 MT, registering a growth of 8%. CIL’s total offtake in the same month of last financial year was 50.4 MT. Coal inventory at CIL’s pitheads stood at 36 MT at the closure of last month. Around 11.5 MT of coal is available at various loading points awaiting shipment.

National: Power

Uninterrupted electricity supplied to paddy growers: Punjab Power Minister

2 August: Punjab Power Minister Harbhajan Singh said that uninterrupted electricity was supplied to paddy farmers in the state during the current sowing season. Electricity has been provided to all agricultural pumpsets and eight hours of power supply is ensured daily to the tubewell connections, he said. The state government had issued a notification and assured eight hours of power supply every day from 10 June to all agricultural pumpsets and tubewell connections across the state. Singh said the Punjab State Power Corporation Limited (PSPCL), on 29 June, set a record by meeting the peak demand of 14,207 MW of electricity, which was 5.78 percent higher than the peak demand of 13,431 MW electricity last year on 1 July 2021. He said the total electricity consumption in the state from March to July is 31,505 million units, 14.23 percent higher than last year’s consumption of 27,580 million units in the corresponding period. The state government was also able to secure an allocation of 1,300 MW power from the central pool, which helped the PSPCL in meeting the demand during the paddy sowing season.

Maharashtra’s power dues at INR215 bn

2 August: The latest power ministry data shows Maharashtra as the state that owes the highest dues of INR215 bn power gencos (generating companies). MSEDCL (Maharashtra State Electricity Distribution Company Limited) managing director Vijay Singhal, said that there was “some difference in the accounting procedure” and according to his calculations, the dues were not more than INR135 bn. Whilst dues owed to gencos seem to be rising, the MSEDCL, which is the state power discom (distribution company) for over 28 mn consumers, faces the problem of recovering money through electricity bills. It has over INR600 bn arrears as pending electricity bill payments (including subsidy) from consumers. Of this, INR420 bn are unpaid bills by state farmers and those owning agricultural land.

Electricity consumption in India will double by 2040: Joshi

31 July: Life without electricity was unimaginable to children and youngsters, and the transformation that its invention had wrought in the world could not be expressed satisfactorily in words, Union Minister for Parliamentary Affairs and Dharwad MP Pralhad Joshi said. Joshi said that the International Energy Agency estimated that electricity consumption in India would double by 2040. Joshi rued that more than 18,000 villages in the country were without electricity even 75 years after Independence.

PM Modi to launch distribution sector scheme of over INR 3k bn to help discoms

30 July: Prime Minister (PM) Narendra Modi on 30 July 2022, inaugurated the revamped Distribution Sector Scheme of the power sector. With an outlay of over INR3k bn over a period of five years from FY 2021-22 to FY 2025-26, the scheme aims to provide financial assistance to discoms (distribution companies).  It is also aimed at improving the operational efficiencies and financial sustainability of discoms and power departments. The Prime Minister launched the scheme at 12:30 pm on the day, as part of the final leg of the ‘Ujjwal Bharat Ujjwal Bhavishya–Power @2047’.

India’s power deficit slips from 2 percent in April to 0.6 percent in June: Power Minister

28 July: Power deficit came down from 2 percent in April to 0.4 percent in May and 0.6 percent in June despite a significant rise in demand for electricity, parliament was informed. Power Minister R K Singh said electricity supplied grew 12.8 percent in April 2022, as compared to the year-ago month, across India. Power requirement, on the other hand, grew 14.7 percent in April on an all-India basis, resulting in a deficit of 2 percent. He said the coal stock available at the power plants monitored by the Central Electricity Authority (CEA) on daily basis was about 25.6 Million Tonnes (MT) as on 31 March 2022. The stock depleted to 21.9 MT as on 30 April 2022 but increased during May and June and has now reached 28.7 MT as on 21 July 2022, which is sufficient for an average of 10 days at a requirement of 85 percent Plant Load Factor (PLF), he said. He said the cumulative inter-regional transmission capacity of the National Grid as on 30 June 2022 is 1,12,250 MW, which is likely to get enhanced to 1,18,050 MW by the end of 2023. He said industrial consumers consume the maximum electricity at 41.16 percent followed by domestic consumers (25.77 percent), agriculture consumers (17.67 percent) and commercial ones (8.29 percent). He said that the power supply hours in urban areas and rural areas as on 8 July 2022, was 23.78 hours and 21.48 hours, respectively.

UP Power Corporation falters on 26 percent revenue in July

27 July: The Uttar Pradesh Power Corporation Limited (UPPCL) collected INR41.16 bn in July which is 74 percent of the total target of INR55.21 bn. Of the total, Purvanchal distribution company contributed INR7.3 bn, Madhyanchal INR7.9 bn, Dakshinanchal INR7.4 bn, Paschimanchal INR16.2 bn and KESCO INR2.1 bn. This way the utility was faltering on the collection of 26 percent of the total revenue. The information was shared by UPPCL chairman M Devraj during a meeting presided over by additional chief secretary (energy) Awanish Awasthi at Shakti Bhawan. Awasthi categorically asked the managing directors and chief engineers of all distribution companies and executive officers of billing agencies that electricity consumers should be billed on time, billed correctly and according to the target set. Underlining the need of collecting revenue as per the electricity supply, Awasthi said that strict action would be taken against negligence and laxity in work at any level. He directed for cent percent billing and revenue collection by 31 July 2022.

National: Non-Fossil Fuels/ Climate Change Trends

Haryana Electricity Regulatory Commission allows PPAs of 150 MW green energy

2 August: The Haryana Electricity Regulatory Commission (HERC) has permitted the Haryana Power Purchase Centre (HPPC) to procure 150 MW renewable energy for next 25 years whilst keeping in view the increased demand during the normal peak days. Whilst allowing the power purchase agreement (PPA), an HERC bench has also put riders for HPPC to ensure that the interests of consumers and the state were protected. The bench also gave necessary guidelines to HPPC and electricity distribution companies for strict adherence to guidelines.

PM Modi lays foundation stone for solar project at Nokh virtually

31 July: Prime Minister (PM) Narendra Modi, whilst participating in the culmination of ‘Ujjwal Bharat Ujjwal Bhavishya – Power @2047’, laid the foundation stone of a 735 MW Solar PV Project at Nokh in Jaisalmer. It is said to be India’s largest domestic content requirement based solar project with 1000 MW at a single location, deploying high-wattage bifacial PV modules with a tracker system. The production will start till September 2023. He launched a national solar rooftop portal which will enable online tracking of the process of installation of rooftop solar plants, starting from registering the applications to release of subsidies in residential consumers’ bank accounts after installation and inspection of the plant. He said that energy and power sectors have a huge role to play in accelerating India’s progress in the next 25 years. He said that the projects launched are significant steps in the direction of green energy and energy security for the county. He informed that in the last eight years, about 1,70,000 MW of electricity generation capacity has been added in the country.

Solar power to light up 80 Tripura villages

31 July: The Tripura government is embarking upon a plan to provide electricity to 80 backward villages with micro solar plants at the cost of INR10 mn each, Deputy Chief Minister Jishnu Dev Varma, who holds the portfolio of power, said. He claimed that the BJP-led government in Tripura in the last four-and-a-half years has modernised the power distribution system without levying any tariff burden on consumers. Moreover, to enhance the power generation infrastructure and harness the potential, the state government set up a separate company. To strengthen the power distribution system, the Tripura State Electricity Corporation Limited has already built over 50 power sub-stations in one-and-a-half years, which reduced the transmission loss and ensured quality power supply to the end users. However, since 62% of the state is under forest cover, it has become difficult to provide electricity to the interior locations and hence, a plan has been drawn to explore non-conventional sources of power to light up those habitations.

ONGC, partners to splash US$6.2 bn on green energy projects

28 July: India’s top oil explorer Oil and Natural Gas Corporation (ONGC) and its partners will invest US$6.2 billion (INR500 bn) in green energy projects to produce carbon-free hydrogen and green ammonia as part of an ambitious decarbonization drive. ONGC has signed a pact with Greenko, one of India’s largest renewable energy companies, to form a 50:50 joint venture for green energy projects. The JV will set up 5.5–7 gigawatt (GW) of solar and wind power projects, and use electricity generated from such plants to split water in an electrolyser to produce green hydrogen, which in turn would be used for manufacturing green ammonia. ONGC, the nation’s biggest producer of crude oil and natural gas, joins the likes of Reliance Industries Ltd (RIL) and the Adani group in chasing carbon-free hydrogen. The two private groups have announced multi-billion projects as part of India’s net-zero goals.

International: Oil

US targets Chinese, UAE firms in new Iran oil sanctions

2 August: The United States (US) imposed sanctions on Chinese and other firms it said helped to sell tens of millions of dollars’ in Iranian oil and petrochemical products to East Asia as it seeks to raise pressure on Tehran to curb its nuclear programme. The US Treasury and the US State Departments imposed sanctions on a total of six companies, four based in Hong Kong, one in Singapore, and one in the United Arab Emirates (UAE) in actions that were announced in separate statements. The Treasury accused Persian Gulf Petrochemical Industry Commercial Co. (PGPICC), one of Iran’s largest petrochemical brokers, of using the firms to facilitate the sale of Iranian petroleum and petrochemical products to East Asia. Since taking office in 2021, US President Joe Biden has been loath to sanction Chinese entities engaged in oil trade with Iran due to hopes of securing an agreement to revive the 2015 Iran nuclear deal.

OPEC oil output rises in July despite outages

1 August: OPEC (Organisation of the Petroleum Exporting Countries) pumped an extra 310,000 barrels of oil per day in July as rising supply from the Gulf offset outages in Nigeria and Libya, a survey showed, with members delivering nearly 60 percent of an output hike pledged under a deal with allies. OPEC pumped 28.98 million barrels per day (bpd) of crude last month, the survey found, up 310,000 bpd from June’s revised total. Some 240,000 bpd of that increase came from the 10 OPEC producers who had signed up to agreement between OPEC and allies led by Russia – a group known as OPEC+ – in which they had pledged to boost output by an extra 412,000 bpd.

China’s CNOOC taps shale oil in South China Sea exploration well

28 July: China’s CNOOC Ltd has tapped commercial flows of oil and gas from a shale exploration well in the South China Sea, marking the first successfully drilled shale oil well offshore China. Exploration well Weiye-1, sunk at the southwestern trough of Beibuwan basin in South China Sea, tested daily production of 20 cubic meters (126 barrels) of oil and 1,589 cubic meters of natural gas. The whole Beibuwan basin could hold about 1.2 billion tonnes of prospective shale oil resource. By late 2021, China produced only 35,000 barrels per day (bpd) of shale oil—extracted from shale rocks and is more complex and expensive to produce than conventional crude—mostly in onshore northern Ordos basin and northwestern Jungar basin.

Cambodia’s petroleum demand expected to reach 4.8 MT by 2030

28 July: The demand for petroleum products in Cambodia is projected to rise to 4.8 million tonnes (MT) in 2030, up from 2.8 MT in 2020, Mines and Energy Minister Suy Sem said. Sem said that the demand will increase to 8.3 MT in 2040. Currently, Cambodia imports all of its petroleum products from Vietnam, Singapore and Thailand as its seabed oil and gas reserves have not been tapped yet. According to the Ministry of Commerce, the Southeast Asian nation spent US$971 million on imports of petrol and diesel in the first five months of 2022, up 57 percent from US$617 million over the same period in 2021. Oil prices in Cambodia have soared since the Russia-Ukraine crisis broke out in February.

International: Gas

Japan’s Mitsui, Mitsubishi shave US$1.7 bn off Sakhalin-2 LNG stakes

2 August: Japanese trading houses Mitsui & Co and Mitsubishi Corp have cut the value of their stakes in the Sakhalin-2 liquefied natural gas (LNG) project in Russia by JPY 217.7 billion (US$1.66 billion) following Moscow’s move to seize control of the project. Russian President Vladimir Putin signed a decree on 30 June to create a company to take over the rights and obligations of the Sakhalin-2 oil and gas project, raising the stakes in an economic war with the West. The Japanese government plans to support the trading companies in their attempts to stay in the Sakhalin-2 project. Japan imports about 10 percent of its LNG from Russia, mainly from Sakhalin-2.

Austria’s gas dependence on Russia down to below 50 percent

1 August: Austria has made progress in weaning itself off Russian natural and boosting gas storage, the government said. Environment Minister Leonore Gewessler said dependence on Russian gas had fallen to less than 50 percent from up to 80 percent previously, which had made Austria one of the countries in Europe most exposed to Russian gas flows. Around 55 percent of the country’s annual consumption was now in storage, the Minister said. The government had allowed other companies to use the storage capacity at Haidach that went unused by Russian company Gazprom.

Algeria, Niger and Nigeria sign MoU for Saharan gas pipeline

28 July: Algeria, Nigeria and Niger have signed a Memorandum of Understanding (MoU) to build a natural gas pipeline across the Sahara desert, Algeria’s Energy Minister Mohamed Arkab said. The three countries agreed in June to revive decades-old talks over the project, a potential opportunity for Europe to diversify its gas sources. The Trans-Saharan gas pipeline is an estimated US$13 billion project that could send up to 30 billion cubic metres a year of supplies to Europe.

International: Coal

Thai PTT sells coal business to Indonesia’s Astrindo for US$471 mn

2 August: Thai energy firm PTT Pcl said it had agreed to sell its coal unit to Indonesia’s PT Astrindo Nusantara Infrastruktur Tbk for US$471 million, as the company moves out of the coal business entirely. The announcement came as global coal demand is set to match a record high reached nearly a decade ago. Astrindo said the deal, which includes coal concessions in Brunei Darussalam, Madagascar and three mines in Kalimantan, Indonesia, will have a “substantial” impact for the company.

Vietnam may slash 14 GW of future coal capacity

28 July: Vietnam is seeking to eliminate some new coal-fired power plant projects as part of its emissions reduction efforts. The Ministry of Industry and Trade has asked the government to remove coal projects with a combined capacity of 14,120 megawatt (MW) from a national master power development plan that is being drafted. Most of these projects were to be developed by state utility Vietnam Electricity, state oil firm PetroVietnam and state coal mining firm Vinacomin. The proportion of coal in the country’s energy mix would be reduced to 13.2 percent by 2045 from an estimated 31 percent in 2030.

International: Power

Blackouts in China as heat wave pushes electricity usage to record levels

27 July: A long-running heatwave in China has pushed electricity usage to record levels in some areas and led to blackouts, with warnings that the high temperatures are expected to continue for at least another week. More than 300 cities were forecast to reach temperatures above 35 degrees Celsius. China Southern Power Grid Company said usage had surpassed last year’s peak load by 3 percent. Blackouts were reported in the provincial capital, Guangzhou, which has recorded a full week of maximum temperatures above 37 degrees Celsius, including highs of 40 degrees Celsius. The company said it was inspecting equipment to avoid overheating and malfunction, and pledged to maintain power supply. In recent years there have been widespread blackouts that have caused havoc across China, blamed on extreme temperatures, rising demand for electricity and shortages in coal, which is still the main source of China’s power.

International: Non-Fossil Fuels/ Climate Change Trends

Portugal’s EDP Renovaveis buys 70 percent of Kronos Solar Projects

29 July: Portugal’s EDP Renovaveis (EDPR), the world’s fourth-largest renewable energy producer, has bought 70 percent of Kronos Solar Projects for 250 million euros (US$256 million) to help boost its growth in Europe, EDPR said. German company Kronos has 9.4 gigawatt (GW) of solar projects in different stages of development in Germany, France, the Netherlands and the UK, EDPR said. Germany represents close to 50 percent of the acquired solar development portfolio. EDPR, which is the wind and solar unit of EDP-Energias de Portugal, said the deal allows it to expand its presence to 12 markets in Europe, which it said represents more than 90 percent of expected solar capacity additions in the European Union until 2030.

Europe needs faster renewables growth rate to reach climate goals

27 July: Wind and solar energy deployment in the European Union (EU) is not proceeding fast enough to meet global climate goals due to a slow permitting process, a report by independent climate think tank Ember showed. In order to reach the goal of limiting warming to 1.5 degrees Celsius, the EU will need an additional 76 gigawatt (GW) of the renewable sources by 2026, though Ember forecasts show only an additional 38 GW will be deployed over the next four years. Wind supply has grown slower than solar capacity, adding an average of 10 GW per year since 2018, and will only reach 54 percent of the growth required in 2026, Ember said.

This is a weekly publication of the Observer Research Foundation (ORF). It covers current national and international information on energy categorised systematically to add value. The year 2022 is the nineteenth continuous year of publication of the newsletter. The newsletter is registered with the Registrar of News Paper for India under No. DELENG / 2004 / 13485.

Disclaimer: Information in this newsletter is for educational purposes only and has been compiled, adapted and edited from reliable sources. ORF does not accept any liability for errors therein. News material belongs to respective owners and is provided here for wider dissemination only. Opinions are those of the authors (ORF Energy Team).

Publisher: Baljit Kapoor

Editorial Adviser: Lydia Powell

Editor: Akhilesh Sati

Content Development: Vinod Kumar

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.