State governments across the country are struggling to cater to the rising power demand on the early onset of summer season, thus, leaving buyers to purchase costlier electricity at the exchanges.
Average electricity prices at Indian Energy Exchange’s (IEX) day-ahead-market increased 21% to INR 9.92/unit in April 2022 against INR 8.23/unit in March 2022 as it continued uptrend on a monthly basis.
On a y-o-y basis, prices recorded an exponential jump of 168% from INR 3.7/unit in April 2021.
Price cap limit upsurge
The rise in spot pricing would have been more pronounced if there was no capping in place for the power transaction.
It is pertinent to note that Central Energy Regulatory Commission (CERC) directed power trading exchanges to cap spot prices at INR 12/unit. The order was introduced from 2 April 2022 in order to curtail price volatility as the same has been frequently hitting the ceiling of INR 20/unit.
Nevertheless, due to high demand amidst low supply, spot prices are continuously hovering at the capped level of INR 12/unit for each 15-minute block in the past few days.
As on 28 April 2022, bids for electricity purchase at IEX portal were 660.87 million units (MU), which was almost 12 times of the sell bids registered at 54.35 MU.
No relief in sight
Recently, India met an all time-high peak power demand of 201.06 giga-watt (GW) on 26 April 2022, surpassing the previous record of 200.539 GW on 7 July 2021. The power ministry has predicted that demand is expected to reach about 215-220 GW in May-June.
However, there remains a discrepancy in power supply-demand which has compelled several states to resort to power cuts.
Notably, the gap between power demand and supply has widened to 1,681 MU during 1-26 April 2022. The volume has already surpassed the levels of October 2021 when the power plants were facing acute coal shortage.
At present, thermal and nuclear plants of around 20,000 MW capacity are not in operation for more than 15 days, as per latest data provided by the power ministry. The government plans to bring them back into opeation to cater to the surplus demand in an efficient manner.
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