Spot power prices fall but states face shortage

The irony of the power market in the country is: While the prices in the spot market continue to decline, big states are still reeling under power shortages.

The power cost in the spot market touched as low as Rs 2.17 per unit for the northern region in October.

The peak shortage, however, remained high in the range of 3,000 Mw to 4,500 Mw, with stagnant volumes as states did not purchase.

Power distribution utilities in large states in terms of power consumption such as Uttar Pradesh, Punjab, Rajasthan and Haryana have long-term power purchase agreements (PPAs) with generating stations.

The cost of power is usually in the range of Rs 3.8-5 per unit.

"Indian Electricity Grid Code (IEGC) specifies that power procurement should be on the basis of merit order dispatch. In view of the above, states can buy power in the day ahead market, where the price is comparatively lower, to optimise its power procurement without any major risks," said a senior executive at Indian Energy Exchange (IEX), country's largest power trading platform.

Most of these states succumb to load-shedding in wake of not purchasing costly power.

Out of the total demand of 126,000 Mw, the peak shortage was 4,030 Mw in November second week.

During the peak demand season in the summer months, the shortage was 5,956 Mw.

"The total installed generation capacity in the country currently stands at 249,000 Mw, so generation is way more than the demand.

"This difference in demand and supply reflects the incapability in the transmission. If cheaper power available in the spot market is going unsold, then there is certainly a lag in the planning of power purchase and supply," said the executive.

Discoms purchase power through long-term and medium-term contracts with major generating stations and through short-term contract from the spot markets viz trading platforms such as Indian Energy Exchange (IEX), Power Exchange of India Limited (PXIL) and others.

Currently, the capacity traded under short term is just nine per cent of the total power generation of the country.

The evacuation system in the country is driven by long-term power transmission. So, while the power generation in the country is in surplus, it remains unsold at the power trading platforms.

IEX said in FY-14, 5,300 million units of electricity remained unsold.