Spot Power Prices At Nine-Year High On Coal Shortage, Festival Season Demand

Prices of power in the spot market rose to a nine-year high in September on account of soaring electricity demand in many states due to the festive season and shortage of coal in thermal plants.

Power prices rose to Rs 14.08 per unit at the India Energy Exchange on Tuesday—the highest since Aug. 2009, when it touched Rs 17.

The average stocks of dry fuel in thermal plants—which contribute to nearly 70 percent of India's power output—stood at 12,660.9 metric tonnes in September as compared with 15,243.90 metric tonnes a month ago, according to data available with the Central Electricity Authority. Worryingly, at least 13 such plants, as on Sept. 16, are left with super-critical coal stocks that will run out in four days. Three plants have critical coal stocks that will last for less than a week.

“Spot power prices are high because of increasing demand and the retreating monsoon,” Rajesh Mendiratta, business development manager at India Energy Exchange Ltd. told BloombergQuint. “Thermal power generation is low due to coal shortage, hence the number of selling bids is lower than buying bids.”

The change in seasons, Mendiratta, said has also led to decreased output of hydel and wind power—which happens when the rains relent and ambient temperature and humidity increases.

Data from the National Load Despatch Centre—the apex body that ensures the integrated operation of the national power system—corroborates Mendiratta's view. Power generated by hydel and wind power plants on Sept. 17 was 545 million units and 132 million units, respectively, according to NLDC data. A month ago, hydel and wind power output was 661 and 351 million units, respectively.

“Any major constraint in logistics affecting domestic coal availability may lead to some upward pressure on spot tariff levels,” said Girishkumar Kadam, vice president, and sector head of corporate ratings at ICRA Ltd. However, he attributed the higher spot power prices to seasonality in demand. “Nonetheless, such price levels would be temporary and are unlikely to be sustained.”

A power exchange functions on the lines of commodity exchanges, providing a platform for buyers, sellers and traders of electricity to enter into spot contracts for the same day, coming day and on a weekly basis. Mendiratta said that higher demand was witnessed in Maharashtra—due to the Ganesh Chaturthi celebrations—apart from Gujarat, West Bengal and Telangana.

Kadam said that prices would remain in the range of Rs 3.5-3.7 per unit in the near-term, given the significant thermal overcapacity in place and subdued thermal plant load factor levels.

Gujarat Buys Spot Power After Dry Spell

Gujarat faces higher energy demand due to a prolonged dry spell due to which it's utilities are supplying additional power to the farming sector. “We are supplying power for an additional two hours to the agricultural sector, resulting in Gujarat witnessing its highest electricity demand,” Pankaj Joshi, managing director of the utility Gujarat Urja Vikas Nigam Ltd., told BloombergQuint over the messaging application WhatsApp.

Joshi said that Gujarat's peak power demand touched a record 17,499 MW on Monday. The previous high was 17,097 MW, on Oct. 9, 2017, he said. “This is why we are purchasing more from the spot market.”

The state faces a deficit of around 1,000 MW, Joshi said, after Essar's Salaya Power Plant in Jamnagar district faced losses and turned unviable.