Cost of electricity on power exchanges hits upper circuit for record length of time

Delhi people woke up to dense fog and chilling cold due to cold wave conditions.

The cost of electricity on power exchanges has remained at the upper circuit of Rs 12 per kilowatt-hour (kWh) for a record length of time, from the last two weeks of December, owing to increased winter heating and robust industrial activity, the latest study by CRISIL Research has revealed.

Further, data showed that not only did prices on the bourses remain at the upper limit for at least two weeks in December, they also remained at Rs 12/kWh for longer parts of the day than usual. The situation has been no different in January as well.

Power exchanges are trading platforms where electricity is sold and bought between generation companies and distribution companies.

“Daily peak price discovered in day-ahead market (DAM) hit upper circuit of Rs 12/kWh in the last two weeks of December, 2022. Peak price has clung to the upper circuit into January (2023) as well, as supply has failed to meet increasing demand, which primarily came from heating requirement as prices started to touch upper circuit at 6:30 in the morning and continued till 11:45 AM,” stated the report, seen by Moneycontrol.

India’s peak power demand touched a record high of 216 GW in April 2022, up 6 percent on a year-on-year (YoY) basis, as several regions in the North reeled under a severe heatwave. Industrial and manufacturing activities also contributed to the surge. In December, peak demand rose once again by a sharp 12 percent YoY and 9 percent month-on-month to 206 GW, this time because of increased heating following the onset of winter, as well as continued momentum in manufacturing activity, which rose to a 25-month high during the month.

Supply deficit impact

Prabhajit Kumar Sarkar, managing director and CEO, Power Exchange India Limited (PXIL), told Moneycontrol that the increasing price trend is an outcome of lower supplies being available compared to the demand during certain hours. “There is a consistent supply deficit, which has been in evidence during the early morning period as well as in the evening peak period. The availability of supplies is higher during the day hours also because power generation from renewable projects, especially solar, kicks in during the day,” he said.

This trend has been seen over the last four weeks, leading to prices hitting the ceiling during the morning and evening peak periods, Sarkar said. Besides, average prices, too, have shown an upward trend over the last four weeks.

To be sure, prices on the energy bourses have been on an uptrend since November, when they rose 21 percent on-month as generation from the entire renewables space — hydro, wind and solar — decreased 28 percent.

Moderation expected

A power ministry official, requesting anonymity, said the demand momentum has continued in January as well. “From January 1 to 15 this year, India has seen a YoY growth of nearly 15 percent in demand. Supply also has caught up compared to December as more and more units have now been serviced. In the coming days, the cost of power in the exchanges will come down as the supply improves,” the official said.

But Sarkar said the power requirement is expected to go up over the next few months with summer demand soon to come in and economic activity maintaining pace in the country. “The steps being taken by the Ministry of Power to ensure generation availability, including through availability of coal to meet this increasing demand, are all in the right direction and we hope there will be adequate power available to meet these requirements in the coming months as well,” he said.

To avert a power crisis situation during the summer months in 2023, the union power ministry on January 9 directed all power generation companies in the country to blend imported coal up to 6 percent of their requirement till September.