Over the first five months of this year and amidst one of the worst droughts in India in recent decades, India lost almost 7 billion units of power, according to a new Greenpeace report [PDF]. A lack of cooling water for coal-based power plants in Karnataka, Maharashtra and West Bengal led to repeated shut downs and cut electricity generation. Not only do the shutdowns raise the spectre of another power shock like in the summer of 2012, but also to large financial losses.

Greenpeace estimates that power plants like the National Thermal Power Corporation at Farraka, Adani Power at Tiroda, GMR at Warora, Mahagenco at Parli and the Karnataka Power Corporation at Raichur have been the worst affected, losing about Rs 2,400 crore in revenues due to the shut downs. Investment advisory firm Equitorials, which reviewed Greenpeace’s analysis says the environmental group has been conservative in its estimation of the losses by assuming that the power companies charge a tariff of Rs 3.5 per kilowatt per hour.

On the last two days of July 2012, electricity blackouts in north and eastern India affected 620 million people or half of India’s population. In the intense summer that year, hydroelectric capacity was strained as rivers dried up but power usage surged to run everything longer – from air conditioners to irrigation pumps. The problem was compounded by the late arrival of the monsoons till finally the northern grid collapsed.

The Greenpeace report analyses how the same environmental factors are putting coal power at risk as well.

Monsoon failures in successive years have caused severe water shortages in 19 states of India this year that have affected 330 million people, according to official estimates. In this situation, the coal plant conundrum cuts both ways. Coal generation is water intensive, with the sector consuming about 4.6 billion cubic meters every year – an amount that would fulfill the basic needs of 251 billion Indians, says Greenpeace.

“Because power plants are seen as an economically important activity they will continue to get water, while others don't and you will see people suffering the consequences at a local level,” said Sripad Dharmadhikary, founder of the resources advocacy organisation Manthan Adhyayan Kendra, at a press conference to release the report.

Greenpeace estimates that 24% of the Indian coal power capacity – amounting to 36 gigawatts – is in areas where surface water is over drawn. Another 38 gigawatts of coal capacity is in areas of extremely high water stress. As if this wasn't enough, another 122 gigawatts capacity is being planned for the same areas.

“Both operating power plants and future power plants are in water stressed areas and most of their operating capacity is under risk,” said Jai Krisha, one of the authors of the Greenpeace report. The document was compiled from daily outage reports of the Central electricity Authority and Right to Information replies from National Thermal Power Corporation.

According to Dharmadhikary, current siting guidelines for coal plants don't mention water stress or water availability as a criterion. Jai Sharda, an investment advisor and founder of Equatorials, said that the investment community has missed the impact of water availability on power plants that represents a real financial risk.

“Building a coal power plant is a 30-year to 40-year proposition and there is a lot of uncertainty in that,” he said. “Time has come to look at water linkages in the same way that we look at coal linkages. Water is more difficult to estimate and is a real tricky risk.”