Continuing its growth momentum, India's power demand in September saw a year-on-year growth of 10-12 percent to 140-142 billion units (BUs) - a five-year high, according to a report released by CRISIL MI&A on September 28.
However, the demand was about seven percent lower than the previous month, with August being one of the driest month in 122 years. The data and its extrapolation in the report is till September 25.
In fact, post the deficit monsoon pan India in August, the recovery in September still could not prevent two successive months of all-time high peak power demand – 238 GW in August followed by a higher 240 GW in September.
"Overall power generation is estimated to have risen 9-10 percent on-year in September to 150-152 BU, after surging to a record high of 159 BU in August 2023. To cater to the rising demand for electricity, generators have increasingly been turning to the short-term power market," it said.
The short-term markets, however, have moderated in September. Compared with the first week, the situation in the third week had improved because of healthy pickup in hydro generation, which led to both volumes (14 percent drop on month) and peak prices (Rs 9.37 per unit from Rs 9.60 per unit in August) in the day ahead market (DAM) dropping sequentially, while real time market (RTM) growth remained healthy.
"Apart from agriculture, industrial and manufacturing activities also contributed to the sharp rise in power demand, which can be gauged by the Manufacturing Purchasing Managers’ Index rising to a three-month high of 58.6 in August. And with the onset of the festive season, this trend is likely to have continued well into September," the report said.
The report also noted that despite the scorching heat, peak prices during the summer months were largely limited to the night-time. It further said generation volatility may have added to the woes in meeting the peak power demand.
While solar and wind face intermittency issues, hydro enables steady supply of power and helps counter the intermittency. "However, disturbed rainfall contributed to a decline of hydro power generation, which, combined with a slip in the share of wind, led to peak prices being recorded in high frequency time blocks on the Indian Energy Exchange (IEX) DAM in August and the first week of September," it said.
In September, CRISIL MI&A Research, though, observes that the share of non-fossil fuel in generation did improve to 26 percent by week three from 23 percent in week one, providing some support to coal generation, thereby reducing pressure on the short-term market towards week three.
But despite this relief, coal stocks with thermal power plants already declined to 25 million tonne as of September 25 from 30 million tonne on August 31. This coal stock would, therefore, suffice for power plants for power plants nine days, a dip from 10 days in August.
To address the increase in coal requirement from the power sector, the government extended the period of necessary blending of imported coal to March 2024, but reduced the weightage to 4 percent from the previous 6 percent, beginning October 2023.
CRISIL MI&A expects power demand to increase 9-10 percent on-year in the second quarter of fiscal 2024, and to rise 5 percent on-year over the full year.
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