One nation, one grid & now, one price

First time in years, grid congestion down to nil, single price across India

After more than two years of synchronising the national power grid into one, December 29 was a red-letter day for Indian power network, with congestion coming down to nil. This was followed by a singular power price across the country of Rs 2.3 per unit in the power spot market, at least for a day.

This is also the lowest power price seen during this year. In December 2014, the price was Rs 3.21 per unit, hence, a massive fall of 25 per cent in a year. A day before the average price discovered was Rs 2.97 per unit, a decrease of about 67 paise per unit in a day, according to data shared by Indian Energy Exchange Limited (IEX) - one of the major power exchanges in the country.

The southern grid, which usually suffers from tepid power supply due to lack of transmission, saw supply improvement and also easing of the prices.

"The last time this happened was in 2010 but then the volumes were lower than now. But as the transmission capacity increases, the likelihood of it happening again also increases," said R K Mediratta, director (business development) at IEX.

On December 31, 2013, southern region was synced with the central grid, thereby achieving one nation, one grid, one frequency as envisaged by state-owned PowerGrid Corporation.

However, power demand has not grown at same pace as generation, which has touched 290,000 megawatt (Mw) and there is a mismatch with transmission planning. Also, most of the states change their plans of power sourcing or don't buy at all. This leads to surplus on one network and deficit in another - the prime reason for congestion in the transmission network across the country. This also led to power price in the south touching Rs 11-20 a unit during summers. At present, the western region is stuck with overcapacity, but the southern states, which are grappling with supply shortages, are unable to use that power because they do not have the transmission capacity. Similarly, the power plants in east and central India await a transmission network to reach out to power deficit states in the north.

"A synchronised national grid has been created but it is still not sufficient. The south connectivity needs to be strengthened even more. Once that happens, there would be free-flow of electricity at the same price. Also, the power market would be governed purely by economic terms of demand-supply," said a power market expert in Delhi.

The price the next day though picked up the next day on Thursday and it is expected to touch Rs 2.73 a unit in south and Rs 2.35 a unit in north on January 1, 2016.

"Cheaper power is available but it is not supplied in regions where the demand is. The south-west and south-east power transmission needs to be strengthened. The situation in the north has eased, some outages did happen the next day. Nevertheless, it's a positive sign for the power market," said Mediratta.

PowerGrid plans to increase connectivity to both south and north region by double. The central government is also tendering out major transmission projects to ease power supply.