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Power Prices Spike To Rs 9.91 In Spot Market; Unlikely To Be Sustained

Even the average price on India Electricity Exchange rose to Rs 5 per unit on low electricity supply, which is higher than the long term agreement prices for both coal and renewable across states

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The power supply prices in the spot market recently witnessed a sharp rise, jumping from Rs 3.12/kwh in August 2017 and Rs 4.11/kwh in September 2017 to Rs 9.91/kwh last week on 13 September in one time interval of 15 minutes time block.

Even the average price on India Electricity Exchange (IEX) rose to Rs 5 per unit on low electricity supply, which is higher than the long term agreement prices for both coal and renewable across states. With spot market witnessing this high for about a week now, the trend is unlikely to sustain according to ICRA.

“The current increase in spot prices has been driven by a demand up-tick with 5.4 per cent growth in April-August 2017. This growth was largely supported by a better demand in few states like Uttar Pradesh (15.5 per cent), Telangana (12.3 per cent), Maharashtra (9.5 per cent), Andhra Pradesh (7 per cent) and Karnataka (5.8 per cent),” says Sabyasachi Majumdar, Senior Vice President & Group Head, ICRA Ratings.

He says that this spike is likely to be temporary and unlikely to be sustained given the still moderate demand, albeit encouraging, growth and surplus thermal capacity available to meet energy demand.

With the lack of long-term power purchase agreements, the developers had shifted to spot market. Similarly, the states started to rely more on the spot market for short term power supply instead of signing the PPAs’ to bring down their costs. The sudden surge in demand coupled with wind power shortage, maintenance of nuclear plants, fall in hydro electricity generation, scanty rain and soaring temperature led to spike in the prices.

ICRA said better energy demand coupled with the reduction in hydro and nuclear based generation in FY 2018 (till August) has led to an improvement in all India thermal PLF, which has increased to 58.0 per cent in August 2017 as against the reported PLF (plant load factor) of 54.4 per cent in July 2017, and significantly higher than the PLF of 51.9 per cent seen in August 2016.

However, it said that the sustenance of this improvement in thermal PLF is dependent upon the recovery in all India energy demand which is function of demand growth from industrial segment and extent of an improvement in off-take capacity of distribution utilities, post implementation of UDAY scheme.

Power Secretary A K Bhalla has exuded confidence that spot power prices will fall to Rs 5 per unit after measures, such as increasing coal supply to thermal power plants by 17 per cent, taken by the government.

He also said that there was a shortage of wind power by 7,500 MW and 2,500 MW nuclear plant was under maintenance shut down including the low hydro power generation.

 "Generation at four hydro power plants went down quite a lot. It went down 12 per cent. Coal generation has gone up by 17 per cent. We are getting more coal rakes. More than 200 rakes are being loaded for power sector. It (spike in spot power price) was for very short term,” added the Secretary.


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