IEX expects online price of electricity to weaken as fallout of coronavirus

While demand from industry and commerce has reduced owing to the lockdown, it has heightened in many other areas like domestic demand through work from home models

Indian Energy Exchange (IEX) anticipates a fall in online electricity prices as a fall-out of the outbreak of Covid-19 pandemic.

“The average price for March is currently at Rs 2.49 per unit and average price since March 22 at Rs 2.15 per unit. The company estimates that rates may continue to be on the lower side as the COVID situation unfolds. The utilities are urged to leverage current low costs to ensure that critical sectors like healthcare, public utilities, and businesses can ensure business continuity in the wake of COVID-19 and provide 24x7 power supply so that end-consumers do not struggle with power-cuts at this critical time”, IEX said in a statement.

While demand from industry and commerce has reduced owing to the lockdown, it has heightened in many other areas- domestic demand through work from home models, healthcare infrastructure and utilities.

Rajiv Srivastava, chief executive officer & managing director, IEX Ltd said, “In today’s crisis situation, we are faced with the onerous responsibility to support and enable our customers in their endeavor to provide uninterrupted power supply to the currently stressed healthcare ecosystem in addition to all public utilities and related businesses that support it. We recognize power as the lifeline of our country - at a time like this more than ever before - and will continue to ensure operational excellence, transparent price discovery and 24x7 support for all members and clients.”  

“Team IEX has been working relentlessly to provide round-the-clock operations with seamless connectivity and security to enable availability of power to all on a 24X7 basis. Our transparent and competitive price discovery mechanism ensures lowest possible price and supports utilities to relieve the stress on the procurement costs,” he added.

According to a report by CARE Ratings, the domestic power sector is feeling the impact of the global spread of the virus and the resultant lockdowns. It has not only led to a fall in electricity consumption but has impacted the supply of key inputs for generators which would lead to project delays and thereby, time and cost overruns. It is also compounding the financial stress of power producers and distribution companies.

The economic disruptions following the lockdown of the country to contain the spread of the virus has further dented electricity demand from the industrial and commercial sector in the country. Consumption of electricity has declined across states. The daily power demand in the country has fallen by 25 per cent since the middle of March 2020 when most parts of the country imposed restriction and shutdowns. Electricity consumption in the country fell from 3,494 million units on March 16 to 2,628 million units on March 28. The drop in consumption has been notably higher in the northern and western regions of the country – a fall of around 30 per cent. The southern regions have reported a decline of 19 per cent.

The study by CARE Ratings foresees the country’s power sector performance to decline significantly in 2020-21 due to the prolonged disruptions caused by Covid-19 pandemic.

“Electricity demand is expected to contract during the year, largely driven by slippages in commercial and industrial demand. With the industrial and commercial sector together accounting for nearly 50 per cent of the country’s electricity consumption, a decline in their consumption would no doubt weigh down overall demand. With the pandemic bringing activity in these sectors to a standstill, electricity demand by these segments is to see a significant decline this year. Consequent to lower demand, power generation would also see a commensurate decline. Given the supply chain disruptions, the generation and capacity addition by renewable energy sources such as solar power would also be lower. With low demand and the resultant low power generation, the capacity utilization rate of thermal power plants would continue to be subdued”, the report added.