Power prices fall 22% in 2015

Peak demand months see massive price reduction with no takers

With 2015 seeing considerable improvement in fuel availability, the power supply position, as well as prices, eased considerably. Power prices fell by as much as 22 per cent in the spot market from a year ago, Rs 2.81 a unit against Rs 3.59 in 2014.

The power market witnessed a healthy reduction in prices in 2015 with increase in supply thanks to addition in capacity and generation during the year, said market analysts. The peak-demand months of June, July and August witnessed prices falling by 34 per cent, 27 per cent and 37 per cent, respectively.

According to the monthly report of the Central Electricity Authority (CEA), power generation between April and October 2015 was 646 billion units with energy deficit of 2.4 per cent. Generation during the corresponding period last year was 617 billion units, while energy deficit was 4.1 per cent.

The fuel constraints, which prevailed in 2014, especially coal shortage, eased significantly in 2015. The average coal stock position has also increased to 21 days as on November 30, 2015 from seven days a year ago, said India Energy Exchange (IEX), one of the country’s leading power exchange platforms. “The power demand was not very high during the peak summer months as well. Only in September did the market see peak demand of 153 gigawatt (Gw). More coal availability and 24 Gw capacity addition last year resulted in surplus capacity,” said Rajesh K Mediratta, vice-president (business development) at IEX.

However, tepid demand from the beleaguered state power distribution companies has dampened the demand. According to CEA’s October report, coal production during April-November 2015 has been 321 million tonnes (mt), an eight per cent increase over 295 mt in the previous year. However, there was no change in demand pattern.

“In 2012, when the peak demand was around 130 Gw, the cumulative installed capacity was 200 Gw. But, when the country added 80 Gw capacity in the past three years, demand rose only by 33 Gw, offsetting the increase in power production,” said a Delhi-based expert.

The Centre offered coal blocks to state and private sector power plants to the tune of 28,000 Mw. Cheap domestic gas was also made available to gas-based power plants totalling 14,000 Mw. According to IEX, inter-state transmission system congestion was eased significantly, especially towards the north. However, southern states continue to witness power deficit.

“The exchange lost 3,887 million units in 2014 compared to 2,445 million units being lost to congestion in 2015 (as on December 16, 2015),” said Mediratta.