Power prices correct nearly 50% on power exchange as demand eases

Power prices in the day ahead and the real-time markets on India Energy Exchange (IEX), the country’s largest power trading exchange platform have seen a significant correction in the past week, a development that would provide much-needed relief to policymakers at a time when several parts of the country are witnessing long power cuts due to the shortage of thermal coal at power plants. 

The price of electricity from May 9-15, in the two key electricity market segments at the IEX platform, corrected significantly. The average price in the day-ahead market for the said period was Rs 5.41 per unit, while the average real-time market price was Rs 4.63 per unit. The Exchange average prices were at about Rs 10.38 per unit just ten days earlier. 

This has been possible owing to several measures initiated by the Central Government as well as the weather-related changes including the earlier than usual pre-monsoon rains in the southern state of Kerala, the exchange said in a statement shared with Business Today.

In April, an abrupt change from winter to summer, faster-than-expected economic recovery, and global supply lines of gas and coal being impacted by the Russia-Ukraine conflict, combined to threaten Asia’s third-largest economy with one of its severest power crises in years.

“The biggest development was a year-on-year power demand growth of 11 per cent during the month of April. Prices were high due to a significant increase in demand and constraints on the supply side,” senior vice president, business development, IEX, Rohit Bajaj said in response to a query from BT.

In response, the government cancelled several passenger services of the Indian Railways to facilitate transportation of coal to power plants and issued a directive asking central and state generating stations to blend domestic supplies with imported coal have helped bring down power prices.

Heavy downpours across the coastal states due to the Cyclone Asnani and an increase in hydro as well as wind power generation in the southern states, especially Karnataka, Tamil Nadu, Telangana and Andhra Pradesh, have led to a decrease in power demand across South India. This has resulted in southern states reducing buy quantum through the IEX platform, leading to the correction in prices.

“Most distribution companies failed to envisage the economic rebound that would follow the Covid-19 pandemic and didn’t take timely measures. But when demand suddenly revived, they were unable to manage it. Other than increasing coal production attention must also be paid to holistic demand forecasting and efficient dispatching of coal to avoid a similar situation from arising in the future,” recommended Bajaj.

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